Must what goes up come down? A quick look at the use of cryptocurrency in football contracts

In a move that would have surprised few on the Rock, it was reported that a football team playing in Gibraltar’s first division would remunerate its players with cryptocurrency. Gibraltar United, which made headlines last year following the major investment by former Real Madrid right-back Michel Salgado.

Over the course of 2018 Gibraltar has seen a substantial increase in the use of cryptocurrency and the emergence of start-up ventures in the blockchain space.

But with this being the first integration of two of the most popular topics in Gibraltar (crypto and football), here’s a few things players (or anyone accepting payment in crypto) should consider.

A cryptocurrency’s volatility is arguably its most talked about feature. Exciting jumps have equally met dramatic drops.

If the player is being paid a fixed amount in sterling and has simply elected to accept payment of that fixed amount by way of cryptocurrency, then that cryptocurrency’s volatility should not affect the payment – the players remuneration (in cryptocurrency) will either be higher or lower depending on its value against sterling (using this example). If this is the case (indeed in any case), the player’s contract should expressly state what the exact amount of consideration is (including any successes bonus or other fees) being paid. If that amount can then be paid in a different currency (e.g. a cryptocurrency), the contract should also expressly say that this may be done and that such a payment in a different currency to that in the contract would be paid on an equivalent basis and calculated at the rate of the date on which the payment is being made.

Moreover, where it is commercially acceptable to the club, the player may also wish to have the club guarantee the payment (in the fiat equivalent) should the cryptocurrency of choice ultimately fail beyond any possibility of picking itself up again.

The above scenario is based on the assumption that it is commercially agreed between the player and the club that the player will be paid the fixed amount and such amount will be paid in crypto. On the other hand, where the player and the club might have commercially agreed that the player’s remuneration will be in crypto (players may well see this as an opportunity to play the crypto-market) – irrespective of the value of that crypto-coin, then players must be made aware that there is no guarantee that a cryptocurrency’s price will rise and there may be no intrinsic value in it.

A cryptocurrency’s volatility could potentially be equally as risky for the club as it is for the player. In order for a club to be able to pay its players in crypto – it needs to own that crypto in the first place. Given that the crypto’s value could go up or down at any minute, the club’s investment in that crypto-coin is itself a risk for the club. Will the value the club has put into that crypto-coin still have the same value the following week or by the end of the season? The guidance notes to the much talked about DLT Regulations[2] suggests that DLT providers should maintain enough reserves in fiat to meet all of its crypto-liabilities. Although football clubs would, in most cases, fall within the DLT Regulations any clubs looking to pay its players in crypto should consider adopt that guidance.

To very quickly conclude, we’ll highlight a few more general issues to consider when when a player enters into any form of contract.

• Length of contract– always check how long are you contracting for, and whether you can terminate the contract if the relationship doesn’t work out as you expected.

• Commercial terms– understand the commercial terms of any contract and how this might affect you as your circumstances change. What may seem like a good deal at the time can quickly sour (particular consideration given the content of this article).

• Know who you’re contracting with– This can have implications when the individual you expected to provide a service tells you that someone else will be handling your affairs, for example.

[1] Over the course of 2018 Gibraltar has seen a substantial increase in the use of cryptocurrency and the emergence of start-up ventures in the blockchain space. Football has also seen a particular increase in investment since the Gibraltar Football Association admission to UEFA in 2013 and FIFA in 2016.

[2] Financial Services (Distributed Ledger Technology Providers) Regulations 2017