Oliver Woodhouse, from Capital Law, looks at some of the reasons behind the rise of celebrity cryptocurrencies and what benefits it offers to celebrities, athletes and fans, as well as discussing potential drawbacks.
By launching the world’s ‘first celebrity cryptocurrency’ and allowing fans to buy his merchandise with ‘Pac’ tokens, it looks like Manny Pacquiao is starting a new trend. Other celebrities, like Caroline Wozniacki and Jason Derulo are planning to launch their own soon too.
Cryptocurrencies could appeal to celebrities for a variety of reasons, including the absence of conventional transaction and exchange charges, which allows for easier international transfer of value – convenient for artists and athletes who are used to working internationally. As cryptocurrencies enter the mainstream, they’re also increasing the market celebrities can engage with.
The relationship between cryptocurrencies and celebrities has also led to the beginning of cryptocurrency companies sponsoring sports teams and events – a great example of exposure and publicity in the sector. We’ve already seen gaming token CashBet sign a sponsorship deal with Arsenal FC; crypto exchange CoinDeal are a sponsor of Wolverhampton FC; and LifeLabs, creator of LIFE Token, have sponsored the British Masters.
The benefits cryptocurrencies offer
This trend offers an opportunity to raise awareness of crypto. It encourages people, who otherwise may not be interested, to engage with cryptocurrencies on the basis they are created by the celebrities they may aspire to or be influenced by. And in return, cryptocurrencies can help to leverage a celebrity’s popularity by broadening their reach.
But it’s not all self-promotion and profit making, celebrities can also use the crypto space as a platform to motivate and encourage fans to make charitable donations. American singer and producer Akon is in the process of launching his cryptocurrency, AKoin. He is hoping it will provide equal financial access across various African nations and establish a platform for entrepreneurs and businesses to build from.
The drawbacks of cryptocurrencies
Sometimes, however, developments may not be so positive. Cryptocurrency’s strength – the heightened privacy and security it offers traders – can also be its weakness, as it makes it vulnerable to unscrupulous criminals.
The damage in these instances can be reputational and financial. Celebrities are allowed to promote cryptocurrencies on their social media platforms, but only if they explicit how they benefit from the publicity. So, when Floyd Mayweather and DJ Khaled were found guilty of making fraudulent claims while promoting a $32 million initial coin offering (ICO) of Centra Tech, it cost them the total of $767,500 in fines. A civil action was also filed against them but was dismissed by a US federal judge.
The rise of cryptocurrencies also brings an environmental challenge. TV and movie legend William Shatner, an avid investor in cryptocurrencies, is a spokesperson for a Canadian solar company called Solar Alliance and a co-founder of the firm Mattereum.
Shatner and Solar Alliance are trying to solve the issues around the excessive energy generated from the mining of cryptocurrencies. They plan to tackle the environmental burden that crypto can cause through using a more sustainable and economically efficient method. Meanwhile, Mattereum is solving the issue of bringing real-world assets under blockchain. This would, for example, enable buyers to purchase a house through cryptocurrency without having to convert it into regular money.
This is clearly a space to watch! We will be interested to see how this develops, it represents a great opportunity to raise awareness of crypto and open the space to a broader audience.
By Oliver Woodhouse