National Australia Bank Ltd (ASX: NAB) shares may get a boost from a recent cryptocurrency investment if it can better serve institutional investors. The ASX bank share has just bought a stake in a business called Zodia Custody.
Being able to provide a full service to institutions is important because a lot of NAB's earnings come from its business clients.
In the FY24 half-year result, the business generated $1.67 billion of cash earnings in the business and private banking, $899 million from corporate and institutional banking, while just $553 million came from personal banking and NZ$750 million from New Zealand banking. Being able to provide everything that clients want can help win and retain institutions.
NAB's crypto industry investment
According to reporting by the Australian Financial Review, NAB has bought a stake in Zodia Custody, which is part of the bank's cryptocurrency strategy to safeguard digital assets held by institutional investors rather than launch its own stablecoin.
Zodia Custody is a competitor to Coinbase and has other major investors, including UK bank Standard Chartered, US custody giant Northern Trust and Japanese lender SBI Holdings.
The AFR reported that clients will be able to hold cryptocurrencies such as bitcoin and ether, as well as tokenised real-world assets, including commodities or property.
How much was invested? NAB and Zodia did not want to reveal the size of the investment or the valuation of Zodia Custody, according to the newspaper.
This is not an exclusive arrangement between NAB and the cryptocurrency holding business – Zodia will look to serve a wide array of investors, which includes other banks. NAB is hoping this partnership will put it ahead of the 'regulatory curve' and lead to partnerships that could link NAB institutional customers to Zodia. Zodia is also applying for a licence in Japan.
What's so special about Zodia?
The AFR reported that Australian cryptocurrency laws could lead to requirements that crypto assets are separated from the internet, stored on hard drives and stored in physical bank vaults – this is called cold storage.
The Zodia technology was reportedly originally developed by the UK military which allows communication from a cold storage vault to the internet, but doesn't allow communications to flow back, enabling offline assets to be traded at close to real-time.
The AFR reported NAB Ventures managing director Amanda Angelini explained the bank aimed to focus on providing simple, safe and secure services:
This is particularly important in newer fields where technology continues to evolve quickly.
NAB Venture's investment in Zodia was based on their innovative approach, institution-grade safety and strong work with regulators.
NAB share price snapshot
Since the start of 2024, the NAB share price has climbed more than 16%, as shown on the chart below, while the S&P/ASX 200 Index (ASX: XJO) has only risen around 2%.
