FINANCE Bloomberg Businessweek March 8, 202130
THE BOTTOM LINE A decision by the FDIC last year could make
it easier for retailers to get into the banking business, but Walmart
faced bad publicity the last time it tried.Crypto Creates
An Art Market
○ Art-backed tokens look like the latest finance
fad, but they have a precedent in photo collectingFour months after Pablo Rodriguez-Fraile spent
almost $67,000 on a digital artwork of Joe Biden
and Donald Trump in the nude, the piece had trans-
formed. Designed to respond to election results, it
had morphed into a naked, graffiti-covered Trump
lying on a trash-strewn lawn. The price changed,
too: Rodriguez-Fraile sold it in late February for
$6.6 million. “Obviously, I thought it would take a
bit longer” to appreciate in value, says the 32-year-
old, who has an MBA from Columbia and describes
himself as a digital asset investor. “Having said that,
funnily enough, I actually think it was a fantastic
deal for the buyer.”
The work in question is a short video created by
Mike Winkelmann, an artist who goes by the name
Beeple. But what Rodriguez-Fraile sold wasn’t an
everyday video file. The art is attached to some-
thing called a nonfungible token, or NFT. Like the
cryptocurrency Bitcoin, NFTs run on blockchain
technology. Unlike Bitcoins, each NFT can be a
unique digital property—one NFT can represent
ownership of a specific work of art. It can also be
designed to suit a creator’s needs: NFTs connected
to Beeple’s artworks, for instance, give him a 10%
royalty every time his art changes hands. Far morefrom China. Walmart’s corporate reputation at
the time was under fire amid allegations of gender
discrimination and for revelations that a significant
number of its associates and their children were
either on Medicaid or uninsured.
Back then the company said it wasn’t seeking
to open bank branches. Rather, it was hoping to
use the charter to process credit and debit card
transactions internally, a move that would have
saved it about $30 million a year at the time. After
two years and several delays, Walmart withdrew
its application to get out of the spotlight. Despite
the setback, it’s continued to push into financial
services: Its MoneyCenter locations allow consum-
ers to cash checks, receive tax preparation ser-
vices, and send money overseas. The company
also offers credit and prepaid debit cards through
partnerships with banks.
Walmart has so far been tight-lipped about itsplans for the new financial technology company,
which it formed with the venture capital firm
Ribbit Capital. Ribbit already has its hands in
many of the world’s most successful fintech
startups, such as Credit Karma, which allows con-
sumers to check their credit scores and compare
financial products, and Affirm, the installment
lender that already provides financing to Walmart
customers online.
“The big question is, What is their objective?”
says Bert Ely, a banking consultant in Alexandria,
Va. Whatever the retailer’s intentions, the banking
industry is on high alert: “The minute you start
talking about Walmart and banking, the alarm
bells go off.” —Jenny Surane, Sridhar Natarajan,
and Matthew Boyleimportant, Beeple’s NFTs have his signature and
proof of sale built into their code. There’s no way
to fake or forge or replicate one of his artworks,
at least as long as the NFT is considered integral
to the work.
NFTs’ ability to confer uniqueness has led to
a boom in digital art’s collectibility. Before, any-
one could replicate an image an infinite number
of times, making it impossible to create the per-
ception of scarcity or value. There was no way,
in other words, to build a market. NFTs offered a
solution. There could be infinite JPEG files of an
artwork but only one “real” image specified by
the NFT. Or six. Or 100. Whatever edition size the
artwork’s creator specified was what it would be.
With an almost literal flip of the switch, a market
was born.
There’s a tendency to compare the boom in NFTs
to the rally in GameStop Corp. shares—another
recent, jaw-dropping value creation story that also
seemed, to outsiders at least, to have come from
nowhere. It’s a particularly seductive narrative
because the same people—young, tech-savvy men—
appear to be behind both phenomena. But there’s
a big difference. Critics of GameStop buyers sayg