Formula 1 team bosses have justified their sponsorship deals with cryptocurrency brands amid concerns over their stability and impact on the environment.
Red Bull announced a lucrative partnership with cryptocurrency exchange ByBit ahead of last week’s test. “We’ve signed significant deals over the over the winter,” team principal Christian Horner acknowledged .”The world is evolving, the world is changing. The whole crypto sector is a fascinating one, we’re seeing it more throughout all sports and of course it’s something that we look at.”
However, serious questions over cryptocurrencies’ environmental credentials (transactions can consume enormous amounts of energy, especially with Bitcoin) and the stability of the platforms, after various recent collapses in value and significant thefts.
Fan token platform Iqoniq – whose logos previously appeared on Alfa Romeo, Williams and McLaren – went into liquidation earlier this year, leaving fans with valueless tokens. An Ethereum theft from F1’s sprint race sponsor Crypto.com was allegedly worth £3 million ($4m).
Mercedes’ Toto Wolff acknowledged the environmental concerns over cryptocurrencies. “The sustainability argument is extremely important,” he said, “but it is not only about mining and the energy that it consumes, but also where the energy comes from.”
“You can’t shut yourself down to modern technology,” said Wolff. “It’s definitely an area that will grow.”
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“We take the sustainability argument very seriously,” Horner also noted. “And of course, as do our partners. We’re obviously looking at technologies that that improve that and if we can assist to achieve that, it’s an exciting new sector and it’s great to see so much interest in Formula 1, [that] it’s so attractive.”
AlphaTauri’s team principal Franz Tost argued that, in sustainability terms, it was important to differentiate different forms of crypto. “They do not [all] have the same way to create energy for their business,” he said.
“Therefore, we must be careful, you can’t say that it’s not sustainable – it depends the different currencies and different ways. For us, it’s an important part for the future, and we will, of course, support this.”
Wolff, who worked in finance prior to entering motorsport, sees real potential in the new currencies. “I think when you’re looking back in 10 years’ time, having made payments that take two days and can’t be done outside of outside of week hours, it’s something that’s going to be a relic of the past.
“This is where cryptocurrencies come in. They are their own industry. That’s why they have become a major player in the financial world and obviously seek exposure through Formula 1, and we all benefit from them, but also learn from it.”
Mercedes is sponsored by cryptocurrency exchange FTX. Wolff said he found it “fascinating to understand crypto exchanges.
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“FTX is a crypto exchange and handling billions of transactions every day. So that is something that that you can’t stop and you have to do it right. And we are certainly a good sparring partner for them in terms of sustainability targets.”
Tost also views cryptocurrency as an important part of global financial services. “Cryptocurrencies have become an important pillar in the business world and we can’t close [our] eyes and say we don’t want to be involved.”
Alpine CEO Laurent Rossi was effusively positive about crypto. “It’s hard to ignore that we digitalising the entire world,” he said, noting that broadcasting the press conference team principals were speaking in would be “also costing a lot of energy.”
Rossi sees “new possibilities” from cryptocurrencies. “I would argue as well that cryptocurrencies can also lessen the impact of real currencies that have also adverse effects on society. So you can see it both ways, you can see the glass half full or half empty.
“Personally, I’m all in favour, so I think it’s going in the right direction. We are [seeing] new eras and making sure that Formula 1 stays modern and relevant to the audience, not staying stuck in the past.”
McLaren team principal Andreas Seidl struck a slightly more cautious note on the “emerging new category” of cryptocurrencies. “These brands want to use the platform of sport, the platform of Formula 1 to promote their brands and therefore, we are absolutely open for it as well,” he said. However, he acknowledged it needs to be “done in the right way.”
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22 comments on “F1 teams convinced by potential of cryptocurrencies despite concerns”
2nd March 2022, 7:58
These feel a bit like the new tobacco sponsors, of course not as harmful, but every team in F1 has one. Many cryptos on exchanges like FTX or Crypto.com are just pure speculative plays that will probably go to 0 in the long run and people will lose lots of $ in the process. It’s like casino advertising.
Regarding environmental concerns, currently it’s pretty bad because the top 2 biggest cryptos (Bitcoin and Ethereum) are high energy consumers since they use Proof-of-Work blockchains. ETH is moving to a Proof-Of-Stake concept soon, and will supposedly reduce the energy consumption with 95%. So it’s getting better on this front with all modern blockchains launching on this new PoS concept.
2nd March 2022, 9:22
Gambling sponsorship in football is another good, and current, analogy. Everyone knows it’s harmful, addictive and dangerous, but almost every Premier League team has a gambling platform on their shirts. I also don’t see Crypto exchanges (plus NFTs) as anything but dumb gambling.
The difference is the Crypto bubble will probably burst itself long before it gets regulated into oblivion.
2nd March 2022, 11:53
@graham228221 – The thing that makes me laugh about gambling sponsorships is how they change the logos on the kids kits to a local charity because seeing kids walk around advertising gambling isn’t a good look. It’s of course ok for kids to be subjected to gambling adverts from every angle – stadiums plastered in them, on games like FIFA, in sticker books, on posters…. Everywhere you see a mention of football, there is a gambling advert attached somewhere. Advertising gambling to kids is apparently ok but obviously it’s a step too far if the kids actually wear a gambling logo themselves because…. well… then it makes the gambling companies look bad!
2nd March 2022, 13:04
I expect the bond bubble will also pop once the Federal Reserve start quantitative tightening mid March to tackle recent high inflation. Depends on how much they pull back.
2nd March 2022, 14:39
@gechichan While I agree with your sentiment in general, I don’t think I would say that crypto is not as harmful as tobacco. True, it is not directly harmful physically. But it is harmful in many, many other ways. There is a very good, albeit one-sided website devoted to highlighting all the problems with crypto and blockchain technology called web3isgoinggreat.com. It’s worth a read, even if for just the descriptions of the entries.
I think in general F1 teams are willing to take whatever sponsorship money is legal even if it comes from questionable sources. Specific recent examples are Ferarri and “Mission Winnow”, which was just a blatant attempt to circumvent tobacco advertising laws, Mercedes with their Kingspan debacle, Haas with Rich Energy, and Haas with Uralkali. They do little due diligence to ensure the company is sound beyond checking to see if the check clears the bank. Although sometimes they fail to even do that (Rich Energy).
But when it comes to crypto technology specifically, I think that the idea that because it is “new technology” and so “can’t shut yourself down”, as Toto put it, is incredibly myopic. Far too often people develop technology and then implement it widely without thinking about how that technology can be used for nefarious purposes. Blockchain and crypto, as a technology, demonstrated time and time again that they can easily be used for bad. So I don’t think just because it is new technology, everyone has to jump on board.
When it comes to F1 teams and their interest in crypto, call me deeply cynical about their motivation, but I suspect the teams are interested beyond mere sponsorship money. In a cost cap era, having a way to hide financial transactions from the eyes of the FIA cost cap police could be a pretty handy tool for a team with a larger budget than they are allowed to spend. I am of course not accusing any team of doing that. But it sure would be an interesting use. Haha.
3rd March 2022, 8:50
@g-funk certainly, there is the issue that it is how the concept is being used is often more of an issue than the underlying concept itself and the way that it is set up encourages it to be misused.
As noted in this thread, there are issues with the use of cryptocurrencies as a means of facilitating payments for criminal activities and the fact that a number of these exchanges take advantage of cryptocurrency not officially being designated as a currency to evade certain financial regulations. More recently, there have been questions over whether some of those exchanges may be indirectly involved in breaking sanctions against some Russian individuals by continuing to facilitate payments from Russia, especially given there has been a doubling in the value of transactions to and from Russia after the traditional banking system started to be hit by sanctions.
It also has to be said that the Bybit sponsorship does raise some questions, given the Financial Conduct Authority has blocked organisations from selling crypto derivatives in the UK on the grounds that a number of companies were misstating the risks associated with those products.
Bybit was one of those companies that was impacted, but whilst they officially withdrew their services from the UK, the Financial Conduct Authority has issued a formal warning that the company appears to still be trying to encourage people in the UK to carry out unauthorised business with it. https://www.fca.org.uk/news/warnings/bybit
The FCA is not the only organisation that has raised such concerns – the German financial conduct authority has also stated that Bybit is not authorised to carry out transactions in Germany https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Verbrauchermitteilung/unerlaubte/2021/meldung_210716_bybit_en.html and Bybit is also under investigation in the USA over claims that it knowingly traded with US citizens, where there is a similar ban on trading crypto derivatives.
2nd March 2022, 18:58
Crypto is at least as harmful as tobacco, it’s not different from gambling. Follow any serious economist and they will tell you that there’s no justification whatsoever for Bitcoin to be worth thousands of $$$. It’s just a Ponzi scheme in disguise, waiting to harm most of those who were attracted to it.
3rd March 2022, 8:22
I disagree. Gold is unanimously seen as a valuable asset to hold due to its scarcity + finite nature, not because it’s all that useful. Bitcoin can also have intrinsic value in our digital world for the exact same reasons (BTC supply is capped at 21million, it’s decentralized and is actually deflationary given how many people lose their coins by forgetting the keys to their digital wallets).
2nd March 2022, 8:03
Money is money. Right?
F1 teams historically never had any qualms about dubious sponsors, as long as they pay.
2nd March 2022, 9:46
Exactly. F1 only exists because of dubious sponsors. This is hardly a new phenomenon. Haas literally peeled a dodgy sponsor off their car a few days ago.
Sports sponsorship is one the easiest way to get your dodgy business in front of millions of people with no questions asked and plenty of reflected credibility.
Red Andy (@red-andy)
2nd March 2022, 8:23
It’s good to see these ‘awkward’ questions being asked. A shame the answers are so unsatisfactory…
2nd March 2022, 13:30
What is unsatisfactory about them?
2nd March 2022, 9:54
The responses by the teams were absolute B@&£#*+!
Subtext “we’ll take cash from anyone we’re allowed to”.
2nd March 2022, 9:58
Now, now, now, that’s not quite right is it.
It’s more “We’ll take cash from anyone we’re allowed to, and having taken their cash we will publicly defend them. We have no morals.”
2nd March 2022, 10:37
Interesting to see them defending this just as Nvidia has been hacked and is having loads of it’s data released to the public. The ransom? Remove limiters from the graphics cards that limit the amount of crypto mining they can do. The limiters have been put in place because no-one can get hold of a graphics card anymore – bots buy them all up immediately so they can be used for mining so putting a limiter on was supposed to help gamers be able to get hold of them but of course, criminals don’t like that as they all use crypto so they’ve attacked Nvidia now.
The co-founder of Valve (who own the gaming platform Steam) recently confirmed why the company will no longer accept payment in crypto. He said that of all payments they had received, 50% were fraudulent.
There’s no doubt that if used the right way, these things can be good but in a staggeringly high percentage of the time, they are used for scams and crime. All this knowledge is well known and whilst I personally don’t have an issue with F1 being sponsored by whoever they like, there’s no excuses when one of the companies they get into bed with is linked to something nasty.
2nd March 2022, 12:50
Definitely crypto plays a part in graphic card shortage but really it’s mostly the supply chain issues and the increased demand for gaming during the lockdown. Also the things a graphic card can do now is much more versatile than before since the 90s, 00s. I’m not just talking about crypto either but a lot of AI stuff because their very good parralels processors. There’s a good reason why Nvidia has also entered that market.
Also, some cards already have limiters removed. It’s not particularly difficult. In one case Nvidia accidentally released a beta driver that had the hashrate unlocked.
Also I like that a public interconnected ledger is “nasty” now.
2nd March 2022, 11:36
“Cigarettes are cool, Betting apps are tacky and Crypto is just pure cringe” – Noam Chomsky
2nd March 2022, 13:32
Sorry but that is actually an Abe Lincoln quote.
2nd March 2022, 12:49
Imagine a team being sponsored by “The Euro” or “The US Dollar”. This whole thing seems ridiculous, spending money to advertise… your money.
2nd March 2022, 12:54
Not really? Most of these advertisers are exchanges. It’s like being advertised by NYSE or Nasdaq. Or a bank.
The article even explains it in the case of FTX. That ain’t the US Federal Reserve or the European Central Bank which are the ones that control the USD and Euro respectively.
These aren’t the actual cryptocurrencies but are companies that deal with them in transactions.
2nd March 2022, 14:56
Makes sense, thanks
2nd March 2022, 13:40
Ummm… Impact on environment ?! Have you never heard of nano for god’s sake. The ignorance is palpable…
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