Last month, the Mercedes Formula One team was forced to suspend its contract with FTX, a platform that was the world’s third-largest cryptocurrency exchange before its well-documented collapse.
FTX was at the forefront of a widening pool of crypto firms that have been investing in sport in recent times to gain greater credibility, and it was also one of several companies from the sector that have been showing up in motorsport.
One team that has already experienced mixed success with businesses tied to the crypto world is McLaren Racing. A partnership with Bitci was suspended in February amid reports of missed payments just months after it emerged that Iqoniq, another former McLaren partner, had gone into liquidation.
One deal that is tracking better for McLaren is its partnership with OKX, the crypto exchange that was announced as a primary sponsor of the team in May.
“We’re doing our due diligence before we start working with the right partners,” Lindsey Eckhouse, director of licensing, ecommerce and esports for McLaren Racing, tells the BlackBook. “This is certainly a new and emerging category, so we understand the necessity of education and responsible messaging.”
With so many unknowns about the cryptocurrency sector, questions will continue to linger over the legitimacy of the industry until firmer regulation is introduced. FTX’s bankruptcy will only result in such questions getting louder, especially those that relate to the industry’s continued involvement in sports sponsorship.
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“From a reputational standpoint, naturally this impacts the category reputation,” says Haider Rafique, chief marketing officer of OKX, commenting on the impact of the plight of FTX. “But I also think that people generally from the traditional financial world have always looked at crypto as a fad, so to speak.”
The FTX collapse threatens to fuel that narrative, but Rafique argues that this is not an issue exclusive to the crypto industry. Armed with a background in trading equities, he is well aware of how similar occurrences can also happen in traditional finance.
“When we think about reputation, I urge the world to think about it not in isolation with crypto markets, but to think about [the finance industry] as a whole,” he adds.
With the first season of McLaren’s multi-year partnership with OKX now complete, the BlackBook dives a little deeper into the deal to uncover how the relationship works in practice and how both parties are trying to address some of the scepticism around cryptocurrency sponsorships.
Spreading the right message
OKX’s multi-year deal with McLaren and their esports outfit grants the company branding on the team’s Formula One cars, driver helmets and kits, while a press release announcing the partnership promised ‘exciting opportunities’ and ‘product innovations’ for fans.
However, when promoting a product that might be unfamiliar to supporters, education is equally as important. Those at McLaren are aware that their followers might have differing levels of knowledge when it comes to crypto. Eckhouse therefore suggests that a big target from the team’s perspective is to bring users who engage with OKX into the McLaren ecosystem.
“When we're looking at this programme, there are two sort of fan groups that we're looking at,” she says. “The first is what we would call our trend fans, so they're the ones that may be more digitally savvy, more engaged in the social elements of the sport and F1.
“And then equally as important are OKX’s existing user base. On their site, they say that they've got 20 million active users through their platform, [so] trying to get that group of people engaged in Formula One and engaged in the McLaren racing family more broadly is really the target here.”
Rafique says that education will be a big focus in the second year of the partnership using “the voice of the athletes and the team”. One way the company itself tries to educate consumers is through its ‘demo’ mode, which allows potential investors to familiarise themselves with the way markets work without investing any real money. Rafique suggests there might soon be opportunities to bring that to life in partnership with McLaren.
“I think that's what you're going to see more of in year two is going into education,” he says.
“And then in the second half of it we might explore doing demo days on track or digital demo days where people can come in and learn about OKX and the services it offers.”
The special livery for the rounds in Singapore and Japan included a variation on the usual driver racesuits, with the pink OKX logo emblazoned across Lando Norris and Daniel Ricciardo's uniforms
Still, though, there remain questions over whether it is responsible to market such a volatile product through a sport that continues to boast a younger demographic of fans. With activations like the recent special livery that ran at both the Singapore and Japanese Grands Prix, the need for a mindful approach has never been more necessary given the level of visibility.
“I think if it’s done correctly, then it’s completely fine,” argues Eckhouse. “One of the big elements that we’ve talked about is how does [our audience] continue to hear that message of responsible trading and responsible engagement with the space?
“[The education is] how we market this to make sure that we are being as safe as possible as we talk to our fans about these new products.”
Rafique further argues that the crypto industry is less intimidating for younger, digital-savvy audiences, which he believes means there is less risk involved.
“I think the younger people are more educated than anything, because it comes very naturally to them,” he explains.
“Where I see more risk is with elderly. There are a lot of scams out there for the elderly, where people just call them and scam them.
“I think that is the more risky side, and we tend to really make sure that the elderly, or people in their retirement age, have the proper education that they can relate to.”
Delivering across the board
The 20 million users of the OKX platform are catered for by a company of around 3,000+ people globally. Rafique describes the company as being “uncomfortably conservative” and says the firm has made a conscious decision not to bring on too many members of staff too soon to ensure OKX does not grow beyond its means too quickly.
That decision-making process has perhaps been informed by the experiences of other crypto companies, with the likes of Coinbase and Crypto.com laying off staff earlier this year.
“We are hiring, but we're not hiring recklessly,” Rafique states. “We want to hire very carefully, make sure that they're the right culture fit, they're coming in for the right reason.
“Because one thing that I've learned in crypto is when there's a bull run, everyone wants to join crypto and work at a crypto company.
“When the bear market hits, they're the first ones to leave and go back to the traditional companies. So I look for people who want to ride out and have a long-term vision on where crypto takes humanity.”
So while a number of sports organisations have seen their crypto deals collapse, Eckhouse implies that OKX’s quest to approach things differently is something that gives McLaren confidence in the long-term viability of the partnership.
“They're one of the leaders in terms of dispelling myths around crypto and around products and services in the space,” claims Eckhouse.
“So heroing those elements of their site and their existing offering more in our communications will be something that we've already focused on and will continue to bring to the forefront.”
Another criticism of the crypto sector has been of its impact on the environment amid concerns over the industry’s high energy consumption and carbon emissions.
As more teams – and the series itself – sign crypto deals, Formula One will have to consider whether partnering with the industry fits with its planned goal of being net zero carbon by 2030.
As it relates to McLaren and OKX, Eckhouse says partnerships with crypto firms can be reconciled with Formula One’s ongoing sustainability push and says OKX are doing “a lot with us around that”. Rafique, meanwhile, is quick to stress that OKX is “not a mining operation”.
“We’re not a token,” he adds. “As a result of that we have less burden to have a better green footprint. I think the burden is mostly on the blockchain services.”
With that being said, the crypto industry at large needs to be doing more to show that it is taking the right steps towards a sustainable future if the scrutiny is to subside. OKX is also promoting the same industry and so it could be argued that a more unified approach is required.
After all, OKX is itself in the process of launching a decentralised blockchain, so Rafique hints that there could be scope further down the line for the company to gain learnings from McLaren around sustainability.
“We do have a decentralised blockchain called OKC, or OK Chain,” Rafique notes. “It's forming now [so] it's not big [enough] for us to really consider that as a problem, but we do think about it.
“I think it's going to be inevitable that we lean into McLaren and their partners who are leading these initiatives globally to see how we can contribute to it.”