Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data


Index to Consolidated Financial Statements			Page
Reports of Independent Registered Public Accounting Firm (Deloitte - PCAOB ID 34)			121
Consolidated Balance Sheets			125
Consolidated Statements of Operations			126
Consolidated Statements of Comprehensive Income (Loss)			127
Consolidated Statements of Changes in Preferred Stock and Stockholders' Equity			128
Consolidated Statements of Cash Flows			129
Notes to Consolidated Financial Statements			130

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Coinbase Global, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Coinbase Global, Inc. (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), changes in preferred stock and stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 15, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

Customer Crypto Assets, Crypto Assets Held, and USDC- Crypto Assets in Cold Storage — Refer to Notes 2, 9, and 10 to the financial statements

Critical Audit Matter Description

Crypto assets are generally accessible only by the possessor of the unique private key relating to the digital wallet in which the crypto assets are held. Accordingly, private keys must be safeguarded and secured in order to prevent an unauthorized party from accessing the crypto assets within a digital wallet. The Company primarily holds crypto assets for its own use, and on behalf of customers, in wallets within its cold storage environment. The loss, theft, or otherwise compromise of access to the private keys required to access the crypto assets in cold storage could adversely affect the Company’s ability to access the crypto assets within its environment. This could result in loss of corporate crypto assets held or loss of crypto assets safeguarded on behalf of customers.

We identified crypto assets in cold storage as a critical audit matter due to the nature and extent of audit effort required to obtain sufficient appropriate audit evidence to address the risks of material misstatement related to the existence and rights & obligations of crypto assets in cold storage. The nature and extent of audit effort required to address the matter includes significant involvement of more experienced engagement team members and discussions and consultations with subject matter experts related to the matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to crypto assets in cold storage included the following, among others:

We consulted with subject matter experts regarding our planned audit response to address risks of material misstatement of crypto assets in cold storage.
We tested the effectiveness of controls within the Company’s private key management process including controls related to physical access, key generation, and segregation of duties across the processes.
We tested the effectiveness of management’s reconciliation control of internal books and records to external blockchains.
We tested the effectiveness of management’s control to segregate corporate crypto asset balances from customer crypto asset balances.
We tested the effectiveness of controls within the processes of customer crypto asset deposits and customer crypto asset withdrawals.
We obtained evidence to evaluate crypto asset balances for appropriate segregation between corporate crypto assets and customer crypto assets.
We utilized our proprietary audit tool to independently obtain evidence from public blockchains to test the existence of crypto asset balances.
We obtained evidence that management has control of the private keys required to access crypto assets in cold storage through a combination of decoding cryptographic messages signed using selected private keys or through observing the movement of selected crypto assets.
We evaluated the reliability of audit evidence obtained from public blockchains.

Commitments and Contingencies - SEC complaint and legal actions by U.S. state securities regulators — Refer to Note 22 to the financial statements

Critical Audit Matter Description

The Securities and Exchange Commission (“SEC”) filed a complaint against the Company in 2023 alleging that the Company has acted as an unregistered securities exchange, broker, and clearing agency and has, through its staking program, offered and sold securities without registering its offers and sales. Additionally, the Company is the subject of various legal actions initiated by U.S. state securities regulators. The Company reviews its lawsuits, regulatory investigations, and other legal proceedings on an ongoing basis and provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the financial statements. Because the outcome of these matters remains uncertain, the Company has not recorded or disclosed a loss contingency as of December 31, 2023. An adverse resolution of the SEC’s complaint or legal actions initiated by U.S. state securities regulators could have a material impact on the Company’s business and financial statements.

We identified the evaluation of potential loss contingencies, and related disclosures, related to the SEC complaint and legal actions initiated by U.S. state securities regulators as a critical audit matter because auditing management's judgment in determining the probability and estimate of loss required significant auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the potential loss contingencies involving the SEC complaint and legal actions initiated by the U.S. state securities regulators included the following, among others:

We tested the effectiveness of internal controls related to management's review of loss contingencies and approval of the accounting treatment and related disclosures.
We inquired of the Company's internal and external legal counsel to understand the legal merits and the basis for the Company's conclusion specific to the likelihood of loss and the estimate of potential loss or range of loss, as applicable.
We obtained and evaluated management's evaluation of the probability of loss and estimation of loss through inquiries, reading the court rulings and briefs prepared by management, and obtaining written responses from internal and external legal counsels.
We evaluated events subsequent to December 31, 2023 that might impact our evaluation of the probability of loss, including any related accrual or disclosure.
We obtained written representations from executives of the Company.
We evaluated whether the Company's disclosures were consistent with our testing.

/s/ Deloitte & Touche LLP

San Francisco, California

February 15, 2024

We have served as the Company's auditor since 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Coinbase Global, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Coinbase Global, Inc. (the “Company”) as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023 of the Company and our report dated February 15, 2024, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

San Francisco, California

February 15, 2024

Coinbase Global, Inc.

Consolidated Balance Sheets

(In thousands, except par value data)


	December 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	5,139,351	$	4,425,021
Restricted cash	22,992		25,873
Customer custodial funds	4,570,845		5,041,119
Safeguarding customer crypto assets	192,583,060		75,413,188
USDC	576,028		861,149
Accounts and loans receivable, net of allowance	361,715		404,376
Income tax receivable	63,726		60,441
Prepaid expenses and other current assets	148,814		217,048
Total current assets	203,466,531		86,448,215
Crypto assets held	449,925		424,393
Deferred tax assets	1,272,233		1,046,791
Lease right-of-use assets	12,737		69,357
Property and equipment, net	192,550		171,853
Goodwill	1,139,670		1,073,906
Intangible assets, net	86,422		135,429
Other non-current assets	362,885		354,929

Total assets	$	206,982,953	$	89,724,873
Liabilities and Stockholders’ Equity
Current liabilities:
Customer custodial cash liabilities	$	4,570,845	$	4,829,587
Safeguarding customer crypto liabilities	192,583,060		75,413,188
Accounts payable	39,294		56,043
Accrued expenses and other current liabilities	447,050		331,236
Crypto asset borrowings	62,980		151,505
Lease liabilities, current	10,902		33,734
Total current liabilities	197,714,131		80,815,293
Lease liabilities, non-current	3,821		42,044

Long-term debt	2,979,957		3,393,448
Other non-current liabilities	3,395		19,531
Total liabilities	200,701,304		84,270,316
Commitments and contingencies (Note 22)
Preferred stock, $0.00001 par value; 500,000 shares authorized and zero shares issued and outstanding at December 31, 2023 and 2022, respectively	—		—
Stockholders’ equity:
Class A common stock, $0.00001 par value; 10,000,000 shares authorized at December 31, 2023 and 2022; 195,192 and 182,796 shares issued and outstanding at December 31, 2023 and 2022, respectively	2		2
Class B common stock, $0.00001 par value; 500,000 shares authorized at December 31, 2023 and 2022; 46,856 and 48,070 shares issued and outstanding at December 31, 2023 and 2022, respectively	—		—
Additional paid-in capital	4,491,571		3,767,686
Accumulated other comprehensive loss	(30,270)		(38,606)
Retained earnings	1,820,346		1,725,475
Total stockholders’ equity	6,281,649		5,454,557
Total liabilities and stockholders’ equity	$	206,982,953	$	89,724,873

The accompanying notes are an integral part of these consolidated financial statements.

Coinbase Global, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)


	Year Ended December 31,
		2023		2022		2021
Revenue:
Net revenue		$	2,926,540	$	3,148,815	$	7,354,753
Other revenue		181,843		45,393		484,691
Total revenue		3,108,383		3,194,208		7,839,444
Operating expenses:
Transaction expense		420,705		629,880		1,267,924
Technology and development		1,324,541		2,326,354		1,291,561
Sales and marketing		332,312		510,089		663,689
General and administrative		1,041,308		1,600,586		909,392
Crypto asset impairment, net		(34,675)		722,211		153,160
Restructuring		142,594		40,703		—


Other operating expense, net		43,260		74,593		477,148

Total operating expenses		3,270,045		5,904,416		4,762,874

Operating (loss) income		(161,662)		(2,710,208)		3,076,570

Interest expense		82,766		88,901		29,160
Other (income) expense, net		(167,583)		265,473		20,463

(Loss) income before income taxes		(76,845)		(3,064,582)		3,026,947

Benefit from income taxes		(171,716)		(439,633)		(597,173)

Net income (loss)		$	94,871	$	(2,624,949)	$	3,624,120






Net income (loss) attributable to common stockholders:
Basic		$	94,752	$	(2,624,949)	$	3,096,958
Diluted		$	94,751	$	(2,631,179)	$	3,190,404

Net income (loss) per share attributable to common stockholders:
Basic		$	0.40	$	(11.81)	$	17.47
Diluted		$	0.37	$	(11.83)	$	14.50

Weighted-average shares of common stock used to compute net income (loss) per share attributable to common stockholders:
Basic		235,796		222,314		177,319
Diluted		254,391		222,338		219,965

The accompanying notes are an integral part of these consolidated financial statements.

Coinbase Global, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)


	Year Ended December 31,
	2023		2022		2021
Net income (loss)	$	94,871	$	(2,624,949)	$	3,624,120
Other comprehensive income (loss):
Translation adjustment, gross	9,077		(41,502)		(9,651)
Income tax effect	741		(6,291)		—
Translation adjustment, net of tax	8,336		(35,211)		(9,651)
Comprehensive income (loss)	$	103,207	$	(2,660,160)	$	3,614,469

The accompanying notes are an integral part of these consolidated financial statements.

Coinbase Global, Inc.

Consolidated Statements of Changes in Preferred Stock and Stockholders' Equity

(In thousands)


	Convertible Preferred Stock						Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings
	Common Stock
	Shares	Amount		Shares	Amount				Total
Balance at January 1, 2021	112,878	$	562,467	73,108	$	—	$	231,024	$	6,256	$	726,304	$	963,584
Conversion of preferred stock	(112,878)	(562,467)		112,878	2		562,465		—		—		562,467
Issuance of equity instruments as consideration for business combinations	—	—		3,985	—		544,588		—		—		544,588
Issuance of common stock from exercise of warrants	—	—		412	—		433		—		—		433
Issuance of common stock upon settlement of Restricted Stock Units (“RSUs”) and restricted common stock, net of shares withheld	—	—		1,775	—		(262,794)		—		—		(262,794)
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		24,909	—		212,476		—		—		212,476
Issuance of common stock under the 2021 Employee Stock Purchase Plan (the “ESPP”)	—	—		50	—		12,444		—		—		12,444
Stock-based compensation expense	—	—		—	—		824,153		—		—		824,153
Purchase of capped calls	—	—		—	—		(90,131)		—		—		(90,131)
Comprehensive loss	—	—		—	—		—		(9,651)		—		(9,651)
Net income	—	—		—	—		—		—		3,624,120		3,624,120
Balance at December 31, 2021	—	$	—	217,117	$	2	$	2,034,658	$	(3,395)	$	4,350,424	$	6,381,689
Issuance of equity instruments as consideration for business combinations	—	$	—	1,663	$	—	$	314,356	$	—	$	—	$	314,356
Issuance of common stock to settle contingent consideration	—	—		58	—		4,661		—		—		4,661


Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld	—	—		7,870	—		(351,867)		—		—		(351,867)

Issuance of common stock upon exercise of stock options, net of repurchases	—	—		3,883	—		56,737		—		—		56,737
Issuance of common stock under the ESPP	—	—		275	—		21,622		—		—		21,622
Stock-based compensation expense	—	—		—	—		1,683,840		—		—		1,683,840
Other	—	—		—	—		3,679		—		—		3,679
Comprehensive loss	—	—		—	—		—		(35,211)		—		(35,211)
Net loss	—	—		—	—		—		—		(2,624,949)		(2,624,949)
Balance at December 31, 2022	—	$	—	230,866	$	2	$	3,767,686	$	(38,606)	$	1,725,475	$	5,454,557
Issuance of equity instruments as consideration for business combination	—	$	—	961	$	—	$	11,302	$	—	$	—	$	11,302
Issuance of common stock to settle contingent consideration	—	—		28	—		2,291		—		—		2,291


Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld	—	—		6,833	—		(277,798)		—		—		(277,798)

Issuance of common stock upon exercise of stock options, net of repurchases	—	—		2,979	—		50,804		—		—		50,804
Issuance of common stock under the ESPP	—	—		381	—		18,959		—		—		18,959
Stock-based compensation expense	—	—		—	—		834,285		—		—		834,285
Stock-based compensation expense recognized in relation to restructuring	—	—		—	—		84,042		—		—		84,042

Comprehensive income	—	—		—	—		—		8,336		—		8,336
Net income	—	—		—	—		—		—		94,871		94,871
Balance at December 31, 2023	—	$	—	242,048	$	2	$	4,491,571	$	(30,270)	$	1,820,346	$	6,281,649

The accompanying notes are an integral part of these consolidated financial statements.

Coinbase Global, Inc.

Consolidated Statements of Cash Flows

(In thousands)


	Year Ended December 31,
	2023		2022		2021
Cash flows from operating activities
Net income (loss)	$	94,871	$	(2,624,949)	$	3,624,120
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	139,642		154,069		63,651
Other impairment expense	18,793		26,518		500
Investment impairment expense	29,375		101,445		—
Stock-based compensation expense	780,668		1,565,823		820,685
Restructuring stock-based compensation expense	84,042		—		—
Provision for transaction losses and doubtful accounts	11,059		(13,051)		22,390
Deferred income taxes	(216,334)		(468,035)		(558,329)
Unrealized loss (gain) on foreign exchange	17,190		28,516		(14,944)
Non-cash lease expense	40,429		31,123		34,542
(Gain) loss on investments	(50,121)		3,056		(20,138)
Fair value (gain) loss on derivatives	(41,033)		7,410		(32,056)
Gain on extinguishment of long-term debt, net	(117,383)		—		—

Crypto asset impairment expense	96,783		757,257		329,152
Crypto assets received as revenue	(460,878)		(470,591)		(1,015,920)
Crypto asset payments for expenses	298,255		383,221		815,783
Realized gain on crypto assets	(145,594)		(36,666)		(178,234)
Other operating activities, net	16,981		883		5,532
Net changes in operating assets and liabilities	326,206		(1,031,448)		141,438
Net cash provided by (used in) operating activities	922,951		(1,585,419)		4,038,172
Cash flows from investing activities
Capitalized internal-use software development costs	(63,202)		(61,038)		(22,073)
Business combinations, net of cash acquired	(30,730)		(186,150)		(70,911)
Purchase of investments	(11,822)		(63,048)		(326,513)
Purchase of assembled workforce	—		—		(60,800)
Loans originated	(586,691)		(207,349)		(336,189)
Proceeds from repayment of loans	513,698		327,539		124,520
Assets pledged as collateral	(27,899)		(41,630)		—
Assets pledged as collateral returned	68,338		—		—
Settlement of crypto futures contract	(43,339)		—		—
Purchase of crypto assets held	(277,367)		(1,400,032)		(3,009,086)
Disposal of crypto assets held	461,325		969,185		2,574,032
Other investing activities, net	3,081		(1,299)		2,280
Net cash provided by (used in) investing activities	5,392		(663,822)		(1,124,740)












Cash flows from financing activities
Issuance of common stock upon exercise of stock options, net of repurchases	47,944		51,497		217,064
Taxes paid related to net share settlement of equity awards	(277,798)		(351,867)		(262,794)
Proceeds received under the ESPP	16,297		20,848		19,889
Customer custodial cash liabilities	(274,822)		(5,562,558)		6,691,859
Issuance of convertible senior notes, net	—		—		1,403,753
Issuance of senior notes, net	—		—		1,976,011
Purchase of capped calls	—		—		(90,131)
Repayment of long-term debt	(303,533)		—		—
Assets received as collateral	66,014		—		—
Assets received as collateral returned	(64,952)		—		—
Proceeds from short-term borrowings	31,640		190,956		20,000
Repayments of short-term borrowings	(52,122)		(191,073)		—
Other financing activities	—		3,679		433
Net cash (used in) provided by financing activities	(811,332)		(5,838,518)		9,976,084
Net increase (decrease) in cash, cash equivalents, and restricted cash	117,011		(8,087,759)		12,889,516
Effect of exchange rates on cash, cash equivalents, and restricted cash	8,772		(163,257)		(64,883)
Cash, cash equivalents, and restricted cash, beginning of period	9,429,646		17,680,662		4,856,029
Cash, cash equivalents, and restricted cash, end of period	$	9,555,429	$	9,429,646	$	17,680,662

Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	76,142	$	82,399	$	3,793
Cash paid during the period for income taxes	39,122		35,888		68,614
Operating cash outflows for amounts included in the measurement of operating lease liabilities	14,730		14,528		20,061

The accompanying notes are an integral part of these consolidated financial statements.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

1. NATURE OF OPERATIONS

Coinbase, Inc. was founded in 2012. In April 2014, in connection with a corporate reorganization, Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. (together with its consolidated subsidiaries, the “Company”). On April 14, 2021, the Company completed the direct listing of its Class A common stock on the Nasdaq Global Select Market (the “Direct Listing”).

The Company provides a trusted platform that serves as a compliant gateway to the onchain economy and enables customers to engage in a wide variety of activities, including discovering, trading, staking, storing, spending, earning, and using their crypto assets in both proprietary and third-party product experiences enabled by access to decentralized applications. The Company offers (i) consumers their primary financial account for the cryptoeconomy, (ii) institutions a full-service prime brokerage platform with access to deep pools of liquidity across the crypto marketplace, and (iii) developers a suite of products granting access to the Company’s ecosystem.

The Company is a remote-first company. Accordingly, the Company does not maintain a headquarters or principal executive offices. Substantially all of the Company’s executive team meetings are held virtually, with meetings occasionally held in-person at locations that are either not in the Company’s offices or in various of the Company’s offices distributed around the world. The Company holds all of its stockholder meetings virtually.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), and include the accounts of the Company and its subsidiaries. The Company’s subsidiaries are entities in which the Company holds, directly or indirectly, more than 50% of the voting rights, or where it exercises control. Certain subsidiaries of the Company have a basis of presentation different from GAAP. For the purposes of these consolidated financial statements, the basis of presentation of such subsidiaries is converted to GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated results.

Use of estimates

The preparation of the consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions in the consolidated financial statements and notes thereto.

Significant estimates and assumptions include the determination of the recognition, measurement, and valuation of current and deferred income taxes; the fair value of performance stock-based awards issued; the useful lives of long-lived assets; the impairment of long-lived assets; the valuation of privately-held strategic investments, including impairments; the fair value of safeguarding customer crypto assets and liabilities; the identification and valuation of assets acquired and liabilities assumed in business combinations; the fair value of derivatives and related hedges; loss contingency identification and valuation, including assessing the likelihood of adverse outcomes from positions, claims, and disputes, recoveries of losses recorded, and associated timing.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties. To the extent that there are material differences between these estimates and actual results, the consolidated financial statements will be affected. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities.

Foreign currency transactions

The Company’s functional currency is the U.S. dollar. The Company has exposure to foreign currency translation gains and losses arising from the Company’s net investment in foreign subsidiaries. The revenues, expenses, and financial results of these foreign subsidiaries are recorded in their respective functional currencies. The financial statements of these subsidiaries are translated into U.S. dollars using a current rate of exchange, with gains or losses, net of tax as applicable, included in accumulated other comprehensive income (loss) (“AOCI”) within the consolidated statements of changes in preferred stock and stockholders’ equity. Cumulative translation adjustments are released from AOCI and recorded in the consolidated statements of operations when the Company disposes or loses control of a consolidated subsidiary. Gains and losses resulting from remeasurement are recorded in other expense (income), net within the consolidated statements of operations.

Realized gains and losses on foreign exchange resulting from the settlement of the Company’s foreign currency assets and liabilities and unrealized impacts on foreign exchange resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies are recognized as a component of other (income) expense, net on the consolidated statements of operations.

Fair value measurements

The Company measures certain assets and liabilities at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1**: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2**: Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3**: Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Cash and cash equivalents

Cash and cash equivalents include cash and interest-bearing highly liquid investments held at financial institutions, cash on hand that is not restricted as to withdrawal or use with an initial maturity of three months or less, and cash held in accounts at venues. Venues include other crypto asset trading platforms that hold money transmitter licenses and payment processors. Cash and cash equivalents excludes customer legal tender, which is reported separately as customer custodial funds on the accompanying consolidated balance sheets. Refer to Customer custodial funds and customer custodial cash liabilities below for further details.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Restricted cash

The Company has restricted cash deposits at financial institutions related to operational restricted deposits.

Customer custodial funds and customer custodial cash liabilities

Customer custodial funds represent restricted cash and cash equivalents maintained in segregated Company bank accounts that are held for the exclusive benefit of customers and deposits in transit from payment processors and financial institutions. Under GAAP, the balance in these accounts that exceeds customer custodial cash liabilities is presented within cash and cash equivalents. Customer custodial cash liabilities represent the obligation to return cash deposits held by customers in their fiat wallets and unsettled fiat deposits and withdrawals. Deposits in transit represent settlements from third-party payment processors and banks for customer transactions. Deposits in transit are typically received within five business days of the transaction date. The Company establishes withdrawal-based limits in order to mitigate potential losses by preventing customers from withdrawing the crypto asset to an external blockchain address until the deposit settles. In certain jurisdictions, deposits in transit qualify as eligible liquid assets to meet regulatory requirements to fulfill the Company’s direct obligations under customer custodial cash liabilities. The Company restricts the use of the assets underlying the customer custodial funds to meet regulatory requirements and classifies the assets as current based on their purpose and availability to fulfill the Company’s direct obligation under customer custodial cash liabilities.

Certain jurisdictions where the Company operates require the Company to hold eligible liquid assets, as defined by applicable regulatory requirements and commercial law in these jurisdictions, equal to at least 100% of the aggregate amount of all customer custodial cash liabilities. Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial funds, and certain other customer receivables. As of December 31, 2023 and 2022, the Company’s eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities.

Safeguarding customer crypto assets and liabilities

The Company safeguards crypto assets for customers in digital wallets and portions of cryptographic keys necessary to access crypto assets on the Company’s platform. The Company safeguards these assets and/or keys and is obligated to safeguard them from loss, theft, or other misuse. The Company records safeguarding customer crypto assets and liabilities, in accordance with Staff Accounting Bulletin 121 (“SAB 121”). The Company maintains a record of all crypto assets in digital wallets held on the Company’s platform as well as the full or a portion of private keys including backup keys, which are maintained on behalf of customers. For crypto assets where the customer can transact without the involvement of the Company or crypto assets where the Company does not maintain a private key or the ability to recover a customer’s private key or their crypto assets, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121. The Company records the safeguarding customer crypto assets and liabilities, on the initial recognition and at each reporting date, at the fair value of the crypto assets which it safeguards for its customers.

The Company is committed to securely storing all customer crypto assets and cryptographic keys (or portions thereof) held on behalf of customers. The value of these safeguarded assets is recorded as safeguarding customer crypto liabilities and corresponding safeguarding customer crypto assets. As such, the Company may be liable to its customers for losses arising from theft or loss of private keys. The Company has no reason to believe it will incur any expense associated with such potential liability because (i) it has no known or historical experience of claims to use as a basis of measurement, (ii) it accounts for and continually verifies the amount of crypto assets on its platform, and (iii) it has established security around private key management to minimize the risk of theft or loss. The Company has adopted a number of measures to safeguard crypto assets it secures including, but not limited to, holding customer crypto assets on a 1:1 basis and strategically storing custodied assets offline using the Company’s cold storage process. The Company also does not reuse or rehypothecate customer crypto

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

assets nor grant security interests in customer crypto assets, in each case unless required by law or expressly agreed to by the institutional customer. Any loss or theft would impact the measurement of the customer crypto assets.

USDC

USDC is a stablecoin redeemable on a one-to-one basis for U.S. dollars. USDC is accounted for as a financial instrument on the consolidated balance sheets.

Accounts and loans receivable and allowance for doubtful accounts

Accounts and loans receivable are contractual rights to receive cash or crypto assets either on demand or on fixed or determinable dates, and are recognized as an asset on the consolidated balance sheets. Accounts receivable consists of stablecoin revenue receivable, customer fee revenue receivable, and other receivables. Loans receivable consists of fiat loans receivable and crypto asset loans receivable.

Stablecoin revenue receivable represents the pro rata portion of income earned and receivable on USDC reserves through the Company’s arrangement with the issuer of USDC. Revenue derived by the Company from this arrangement is dependent on various factors including the balance of USDC on the Company’s platform, the total market capitalization of USDC, and the prevailing interest rate environment.

Customer fee accounts receivable primarily comprise receivables from custodial fee revenue and other subscription and services revenue, which includes fees earned from providing services such as dedicated secure cold storage, staking, delegation, infrastructure, financing, and software licenses. Receivables are recorded at the transaction price, representing consideration to which the Company expects to be entitled to in exchange for satisfying performance obligations. For obligations satisfied over time, receivables are recognized as revenue is earned, typically monthly. For obligations satisfied at a point in time, receivables are recognized when the obligation is complete.

Fiat loans receivable represents cash loans made to institutions, and prior to November 20, 2023, to consumers. These loans are collateralized with USDC or certain crypto assets held by those users on the Company’s platform. The Company generally does not have the right to use such collateral unless the borrower defaults on the loans. See Collateral below for additional details regarding the Company’s obligation to return collateral. Fiat loans receivable are measured at amortized cost. The carrying value of the loans approximates their fair value due to their short-term duration of less than 12 months.

Crypto asset loans receivable represents crypto asset loans made to institutions. These loans are collateralized with fiat, USDC, or certain crypto assets held by those users on the Company’s platform. Crypto asset loans receivable are initially and subsequently measured at the fair value of the underlying crypto asset lent and adjusted for expected credit losses.

The Company also loans USDC. When USDC is loaned, it is not derecognized from the consolidated balance sheets as the Company maintains effective control over the transferred USDC. Therefore, there are no USDC loans receivable recorded, and the loaned USDC remains presented in USDC in the consolidated balance sheets.

The Company recognizes an allowance for doubtful accounts for receivables based on expected credit losses. In determining expected credit losses, the Company considers historical loss experience, the aging of its receivable balance, and the fair value of any collateral held. For fiat loans receivable and crypto asset loans receivable, the Company applies the collateral maintenance provision practical expedient. Due to the collateral requirements the Company applies to such loans, the Company’s process for collateral maintenance, and collateral held on the Company’s platform, the Company’s credit exposure is significantly limited and no allowance, write-offs or recoveries were recorded against fiat loans receivable or crypto asset loans receivable for the periods presented. The Company would recognize credit losses on these loans if there is a collateral shortfall and it is not reasonably expected that the

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

borrower will replenish such a shortfall. Due to the nature of the collateral the Company requires to be pledged, the Company is readily able to liquidate in the case of the borrower’s default.

Collateral

Company assets pledged as collateral

The Company enters into fiat, USDC, and crypto asset borrowing arrangements with certain institutional customers that require the Company to pledge collateral in the form of fiat, USDC, or crypto assets in which the lender may have the right to sell, repledge, or rehypothecate such collateral without the Company’s consent. The Company also enters into certain derivative contracts which require the Company to pledge collateral in the form of fiat. The Company is required to maintain a collateral to loan ratio per the borrowing arrangements.

If the lender has the right to use the collateral or if the collateral is fiat, the Company presents the collateral pledged as a right to receive the collateral within prepaid expenses and other current assets in the consolidated balance sheets. The lender is not obligated to return collateral equal to the fair value of the borrowings if the Company defaults on its borrowings. As of December 31, 2023, the Company has not defaulted on any of its borrowings.

Borrower assets pledged as collateral

For loans receivable, the Company requires borrowers to pledge collateral, for which it may then be required to record a corresponding obligation to return the collateral to the borrower. As of December 31, 2023, the collateral requirements ranged from 115% to 250% of the fair value of the loan, and the borrower is required to pledge additional assets to maintain their required collateral percentage. The Company may have the right to use collateral pledged by the borrower. If the Company has the right to use collateral denominated in USDC, crypto assets, or fiat, the Company records the collateral as an asset within USDC, crypto assets held, or cash and cash equivalents, respectively, with a corresponding obligation to return collateral within accrued expenses and other current liabilities, in the consolidated balance sheets. For collateral denominated in USDC or crypto assets that is pledged against fiat loans receivable, the Company will only record the collateral if it has also been subsequently sold. The Company is not obligated to return collateral equal to the fair value of the borrowings if the borrower defaults. Due to the nature of the collateral the Company requires to be pledged by borrowers, the Company is readily able to liquidate in the case of the borrower’s default.

Off-balance sheet collateral arrangements

The Company may pledge USDC collateral to lenders which are not recognized as assets pledged as collateral as they do not meet the derecognition criteria. This collateral continues to be shown within USDC on the consolidated balance sheets.

The Company may receive collateral denominated in USDC or crypto assets pledged by borrowers where the Company does not have a right to use the collateral and does not recognize it on the consolidated balance sheets since the collateral does not meet the recognition criteria.

Concentration of credit risk

The Company’s cash and cash equivalents, restricted cash, customer custodial funds, and accounts and loans receivable are potentially subject to concentration of credit risk. Cash and cash equivalents, restricted cash, and customer custodial funds are primarily placed with financial institutions which are of high credit quality. The Company invests cash and cash equivalents and customer custodial funds primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have corporate deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company has not experienced losses on these accounts and does not believe it is exposed to any significant credit risk with respect to these accounts. The

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Company also holds cash and crypto at crypto asset trading venues and payment processors and performs a regular assessment of these venues as part of its risk management process.

The issuer of USDC reported that, as of December 31, 2023, underlying reserves were held in cash, short-duration U.S. Treasuries, and overnight U.S. Treasury repurchase agreements within segregated accounts for the benefit of USDC holders.

As of December 31, 2023 and 2022, the Company had four and one counterparties, respectively, who accounted for more than 10% of the Company’s accounts and loans receivable, net. See Note 13. Collateral for details on collateralization of loans receivable.

During the years ended December 31, 2023 and 2022, no counterparty accounted for more than 10% of total revenue, respectively.

Crypto assets held

The crypto assets held by the Company, with no qualifying fair value hedge, are accounted for as intangible assets with indefinite useful lives, and are initially measured at cost. Crypto assets accounted for as intangible assets are subject to impairment losses if the fair value of crypto assets decreases below the carrying value at any time during the period. The fair value is measured using the quoted price of the crypto asset at the time its fair value is being measured in the Company’s principal market. Gross impairments, net of subsequent realized gains on the sale and disposal of previously impaired crypto assets held are reflected in crypto asset impairment, net in the consolidated statements of operations. The Company assigns costs to crypto assets on a first-in, first-out basis.

Crypto assets held as the hedged item in qualifying fair value hedges are initially measured at cost. Subsequent changes in fair value attributable to the hedged risk are adjusted to the carrying amount of these crypto assets, with changes in fair value recorded in other operating expense, net in the consolidated statements of operations.

The Company recognizes crypto assets received through airdrops or forks if the crypto asset is expected to generate probable future benefit and if the Company is able to support the trading, custody, or withdrawal of these assets. The Company records the crypto assets received through airdrops or forks at their cost.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in lease right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of future minimum lease payments over the lease term. Most leases do not provide an implicit rate, so the Company uses its incremental borrowing rate. The operating lease ROU assets also include any lease payments made before commencement and exclude lease incentives.

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that those options will be exercised. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has made the policy election to account for short-term leases by recognizing the lease payments in profit or loss on a straight-line basis over the lease term and not recognizing these leases on the consolidated balance sheets. Variable lease payments are recognized in profit or loss in the period in which the obligation for those payments is incurred. The Company has real estate lease agreements with lease and non-lease components for which the Company has made the accounting policy election to account for these agreements as a single lease component.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Property and equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the lesser of the estimated useful life of the asset or the remaining lease term. The estimated useful lives of the Company’s property, equipment, and software are generally as follows:


Property and Equipment						Useful Life
Furniture and fixtures						Three to five years
Computer equipment						Two to five years
Leasehold improvements						Lesser of useful life or remaining lease term
Capitalized software						One to three years

Capitalized software consists of costs incurred during the application development stage of internal-use software or implementation of a hosting arrangement that is a service contract. Capitalized costs consist of salaries and other compensation costs for employees, fees paid to third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality of the software. Other costs that do not meet the capitalization criteria are expensed as incurred.

The Company evaluates impairments of its property and equipment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the asset is not recoverable, measurement of an impairment loss is based on the fair value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value.

Business combinations, goodwill, and acquired intangible assets

The results of businesses acquired in a business combination are included in the consolidated financial statements from the date of the acquisition. The Company accounts for its business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill. Acquisition-related costs incurred by the Company are recognized as an expense in general and administrative expenses within the consolidated statements of operations.

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement.

During the measurement period, which may be up to one year from the acquisition date, and to the extent that the value was not previously finalized, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information about facts and circumstances that existed at the date of acquisition, reevaluates these estimates and assumptions quarterly, and records any adjustments to the Company’s preliminary estimates to goodwill, provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Goodwill is tested for impairment at the reporting unit level on an annual basis (October 1 for the Company) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. For the periods presented, the Company did not have any goodwill impairment charges.

Acquired intangible assets with a definite useful life are amortized over their estimated useful lives on a straight-line basis. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in circumstances warrant a revision to the remaining period of amortization. Intangible assets assessed as having indefinite lives are not amortized, but are assessed for indicators that the useful life is no longer indefinite or for indicators of impairment each period.

The Company evaluates the recoverability of acquired intangible assets on an annual basis, or more frequently whenever circumstances indicate an intangible asset may be impaired. When indicators of impairment exist, the Company estimates future undiscounted cash flows attributable to such assets. In the event future undiscounted cash flows do not exceed the carrying amount of the assets, the asset would be considered impaired. The impairment loss is measured based upon the difference between the carrying amount and the fair value of the assets.

Investments

The Company holds strategic investments, which are included in other non-current assets on the consolidated balance sheets. The Company’s strategic investments primarily include equity investments in privately held companies without readily determinable fair values where the Company (1) holds less than 20% ownership in the entity, and (2) does not exercise significant influence. These investments are recorded at cost and adjusted for observable transactions for same or similar investments of the same issuer (referred to as the measurement alternative) or impairment.

Crypto asset borrowings

The Company borrows USDC and crypto assets from third parties on a secured and unsecured basis. When USDC is borrowed, it is not recorded on the consolidated balance sheets as the transfer criteria in ASC Topic 860, Transfers and Servicing, have not been met. Crypto assets borrowed by the Company are reported in crypto assets held on the consolidated balance sheets.

Crypto asset borrowings are accounted for as hybrid instruments, with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset. The host contract is not accounted for as a debt instrument because it is not a financial liability, is carried at the initial fair value of the assets acquired and reported in crypto asset borrowings on the consolidated balance sheets. The embedded derivative is accounted for at fair value, with changes in fair value recognized in other operating expense, net in the consolidated statements of operations. The embedded derivatives are included in crypto asset borrowings on the consolidated balance sheets.

The term of these borrowings either can be for a fixed term of less than one year or open-ended and repayable at the option of the Company or the lender. These borrowings bear a fee payable by the Company to the lender, which is based on a percentage of the amount borrowed and is denominated in the related crypto asset borrowed. The borrowing fee is recognized on an accrual basis and is included in other operating expense, net in the consolidated statements of operations.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Derivative contracts

Derivative contracts derive their value from underlying asset prices, other inputs, or a combination of these factors. Derivative contracts are recognized as either assets or liabilities on the consolidated balance sheets at fair value, with changes in fair value recognized in other operating expense, net. Cash flows from derivative contracts are recognized as investing activities and adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities in the consolidated statements of cash flows.

The Company enters into arrangements that result in obtaining the right to receive or obligation to deliver a fixed amount of crypto assets in the future. These are hybrid instruments, consisting of a receivable or debt host contract that is initially measured at the fair value of the underlying crypto assets and is subsequently carried at amortized cost, and an embedded forward feature based on the changes in the fair value of the underlying crypto asset. The embedded forward is bifurcated from the host contract, and is subsequently measured at fair value.

Derivatives designated as hedges

The Company applies hedge accounting to certain derivatives executed for risk management purposes. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. The Company uses fair value hedges primarily to hedge the fair value exposure of crypto asset prices. Derivative amounts affecting earnings are recognized in the same line item as the earnings effect of the hedged item.

Long-term debt and interest expense

Long-term debt is carried at amortized cost. The Company accounted for the 2026 Convertible Notes wholly as debt because (1) the conversion features do not require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, and (2) the 2026 Convertible Notes were not issued at a substantial discount.

The Company recognizes gains and losses on extinguishment of long-term debt as the difference between the reacquisition price and the net carrying amount of the debt, and these gains and losses are recognized in current-period earnings in other expense (income), net in the consolidated statements of operations.

Debt discounts and debt issuance costs are amortized to interest expense using the effective interest method over the contractual term of the respective note.

The Capped Calls meet the criteria for classification in equity, are not remeasured each reporting period and are included as a reduction to additional paid-in capital within stockholders’ equity.

Revenue recognition

The Company determines revenue recognition from contracts with customers through the following steps:

identification of the contract, or contracts, with the customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of the revenue when, or as, the Company satisfies a performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Transaction revenue

Consumer transaction revenue represents transaction fees earned from customers that are primarily individuals, while institutional transaction revenue represents transaction fees earned from institutional customers, such as hedge funds, family offices, principal trading firms, and financial institutions.

The Company’s service comprises a single performance obligation to provide a crypto asset matching service when customers buy, sell or convert crypto assets, or trade derivatives. That is, the Company is an agent in transactions between customers and presents revenue for the fees earned on a net basis.

Judgment is required in determining whether the Company is the principal or the agent in transactions between customers. The Company evaluates the presentation of revenue on a gross or net basis based on whether it controls the crypto asset provided before it is transferred to the customer (gross) or whether it acts as an agent by arranging for other customers to provide the crypto asset to the customer (net). The Company does not control the crypto asset being provided before it is transferred to the buyer, does not have inventory risk related to the crypto asset, and is not responsible for the fulfillment of the crypto asset. The Company also does not set the price for the crypto asset as the price is a market rate established by users of the platform. As a result, the Company acts as an agent in facilitating the ability for a customer to purchase crypto assets from another customer.

The Company considers its performance obligation satisfied, and recognizes revenue, at the point in time the transaction is processed. Contracts with customers are usually open-ended and can be terminated by either party without a termination penalty. Therefore, contracts are defined at the transaction level and do not extend beyond the service already provided.

The Company charges a fee at the transaction level. The transaction price, represented by the transaction fee, is calculated based on volume and varies depending on payment type and the value of the transaction. Crypto asset purchase or sale transactions executed by a customer on the Company’s platform is based on tiered pricing that is driven primarily by transaction volume processed for a specific historical period. The Company has concluded that this volume-based pricing approach does not constitute a future material right since the discount is within a range typically offered to a class of customers with similar volume. The transaction fee is collected from the customer at the time the transaction is executed. In certain instances, the transaction fee can be collected in crypto assets, with revenue measured based on the amount of crypto assets received and the fair value of the crypto assets at the time of the transaction.

The transaction price includes estimates for reductions in revenue from transaction fee reversals that may not be recovered from customers. Such reversals occur when the customer disputes a transaction processed on their credit card or their bank account for a variety of reasons and seeks to have the charge reversed after the Company has processed the transaction. These amounts are estimated based upon the most likely amount of consideration to which the Company will be entitled. All estimates are based on historical experience and the Company’s best judgment at the time to the extent it is probable that a significant reversal of revenue recognized will not occur. All estimates of variable consideration are reassessed periodically. The total transaction price is allocated to the single performance obligation. While the Company recognizes transaction fee reversals as a reduction of net revenue, crypto asset losses related to those same transaction reversals are included in transaction expense.

Stablecoin revenue

Since 2018, the Company has earned income on fiat funds under an arrangement with the issuer of USDC which was included in interest income within subscriptions and services revenue. On August 18, 2023, the Company entered into an updated arrangement with the same counterparty. Pursuant to the arrangement, the Company earns a pro rata portion of income earned on USDC reserves based on the amount of USDC held on each respective party’s platform, and from the distribution and usage of USDC after certain expenses. Revenue derived by the Company from this arrangement is dependent on various factors including the balance of USDC on the Company’s platform, the total market capitalization of

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

USDC, and the prevailing interest rate environment. The arrangement is treated as an executory contract accounted for on an accrual basis. Prior period revenue recognized under the previous arrangement was reclassified to the stablecoin revenue line within subscription and services revenue, to conform to current period presentation.

Blockchain rewards

Blockchain rewards primarily comprises staking revenue, in which the Company participates in networks with proof-of-stake consensus algorithms through creating or validating blocks on the network using the staking validators that it controls. Blockchain protocols, or the participants that form the protocol networks, reward users for performing various activities on the blockchain. The most common form today is participating in proof-of-stake networks, however, there are other consensus algorithms. The Company considers itself the principal in transactions with the blockchain networks, and therefore presents such blockchain rewards earned on a gross basis. In exchange for participating in the consensus mechanism of these networks, the Company recognizes revenue in the form of the native token of the network. Each block creation or validation is a performance obligation. Revenue is recognized at the point when the block creation or validation is complete and the rewards are transferred into a digital wallet that the Company controls. Revenue is measured based on the number of tokens received and the fair value of the token at contract inception.

Interest income and corporate interest income

The Company holds customer custodial funds and cash and cash equivalents at certain third-party banks which earn interest. Interest income earned from customer custodial funds, cash and cash equivalents and loans is calculated using the interest method and is not within the scope of Topic 606 – Revenue from Contracts with Customers. Interest earned on customer custodial funds and loans is included in interest income within subscription and services revenue. Interest earned on the Company’s corporate cash and cash equivalents is included in corporate interest and other income within other revenue.

Custodial fee revenue

The Company provides a dedicated secure cold storage solution to customers and earns a fee, which is based on a contractual percentage of the daily value of assets under custody. The fee is collected on a monthly basis. These contracts typically have one performance obligation which is provided and satisfied over the term of the contracts as customers simultaneously receive and consume the benefits of the services. The contract may be terminated by a customer at any time, without incurring a penalty. Customers are billed on the last day of the month during which services were provided, with the amounts generally being due within thirty days of receipt of the invoice.

Other subscription and services revenue

Other subscription and services revenue primarily comprises revenue from Coinbase One, Coinbase Cloud, which includes staking application, delegation, and infrastructure services, Prime Financing, and revenue from other subscription licenses. Generally, revenue from other subscription and services contains one performance obligation, may have variable and non-cash consideration, and is recognized at a point in time or over the period that services are provided.

Transaction expense

Transaction expense includes costs incurred to operate the Company’s platform, process crypto asset trades, and perform wallet services. These costs include blockchain rewards distributed to customers for their participation in blockchain activities such as staking, account verification fees, and fees paid to payment processors and other financial institutions for customer transaction activity, contract acquisition costs, crypto asset losses due to transaction reversals, and miner fees to process transactions on blockchain networks. Transaction expense also includes rewards paid to users for staking activities

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

conducted by the Company. Fixed-fee costs are expensed over the term of the contract and transaction-level costs are expensed as incurred. The Company has elected to apply the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that would otherwise have been recognized is one year or less.

Stock-based compensation

The Company recognizes stock-based compensation expense using a fair-value based method for costs related to all equity awards granted under its equity incentive plans to employees, directors, and non-employees of the Company including restricted stock, RSUs, stock options, and purchase rights granted under the ESPP.

Valuation

The fair value of restricted stock and RSUs is estimated based on the fair value of the Company’s common stock on the date of grant.

The Company estimates the fair value of stock options with only service-based conditions and purchase rights under the ESPP on the date of grant using the Black-Scholes-Merton Option-Pricing Model. The model requires management to make a number of assumptions, including the fair value and expected volatility of the Company’s underlying common stock price, expected life of the option, risk-free interest rate, and expected dividend yield, which are calculated as follows:

The fair value of the underlying stock is the fair value of the Company’s common stock on the date of grant. Prior to the Direct Listing, this fair value was determined using the probability weighted expected return method, with a discounted cash flow model or a market multiples method used for each expected outcome. Following the Direct Listing, this fair value is the closing price of the Company’s Class A common stock as reported on the Nasdaq Global Select Market on the grant date.
The expected stock price volatility assumption for the Company’s stock is determined by using a weighted average of the historical stock price volatility of comparable companies from a representative peer group, as sufficient trading history for the Company’s common stock is not available.
The Company uses historical exercise information and contractual terms of options to estimate the expected term.
The risk-free interest rate for periods within the expected life of the option is based on the U.S. Treasury zero coupon bonds with terms consistent with the expected term of the award at the time of grant.
The expected dividend yield assumption is based on the Company’s history and expectation of no dividend payouts.

The Company has two types of performance awards outstanding: performance stock options subject to a market condition and performance RSUs subject to both a market condition and a financial performance condition. The Company determines the fair value of performance awards subject to a market condition using a Monte Carlo Simulation Model (a binomial lattice-based valuation model). The Monte Carlo Simulation Model uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair values of the awards are not subject to change based on future market conditions. The fair value of performance RSUs, or tranches thereof, subject to a financial performance condition is estimated based on the fair value of the Company’s Class A common stock on the date of grant.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Expense attribution

Stock-based compensation expense for RSUs and stock options with only service-based conditions, and purchase rights under the ESPP, is recorded on a straight-line basis over the requisite service period. The Company has elected to account for forfeitures of awards as they occur, with previously recognized compensation reversed in the period that the awards are forfeited.

The Company uses the accelerated attribution method to recognize expense over the requisite service period for performance awards, or tranches thereof, subject to a market condition. Once the associated performance condition, if any, becomes probable of being achieved, regardless of whether or not the market condition is ultimately satisfied, stock-based compensation expense is recognized according to the market-based fair value measured on the grant date and subject to continued service over the period.

For performance awards, or tranches thereof, subject to financial performance conditions, the Company evaluates the cumulative revenue and the cumulative adjusted EBITDA results at each reporting date to determine which performance condition and level of achievement becomes most probable of being achieved for the assessment period. Once a threshold of achievement is reached, stock-based compensation expense is recognized over the requisite service period based on the result that is probable of occurring at each reporting date until the final vesting date, subject to continued service over the period.

Early exercise option

Certain stock options granted provide employee option holders the right to exercise unvested options for restricted common stock, which is subject to a repurchase right held by the Company at the original purchase price in the event the optionee’s employment is terminated either voluntarily or involuntarily prior to vesting of the exercised stock. Early exercises of options are not deemed to be substantive exercises for accounting purposes and accordingly, amounts received for early exercises are recorded as a liability. These repurchase terms are considered to be a forfeiture provision and do not result in variable accounting. These amounts are reclassified to common stock and additional paid in capital as the underlying shares vest.

Technology and development

Technology and development expenses include personnel-related expenses incurred in operating, maintaining, and enhancing the Company’s platform and in developing new products and services. These costs also include website hosting and infrastructure expenses, and the amortization of internally developed and acquired developed technology. Certain costs of developing new products and services are capitalized to property and equipment, net.

Sales and marketing

Sales and marketing expenses primarily include personnel-related expenses, marketing programs costs, and costs related to customer acquisition. Sales and marketing costs are expensed as incurred.

General and administrative

General and administrative expenses include personnel-related expenses incurred to support the Company’s business, including executive, customer support, compliance, finance, human resources, legal, and other support operations. These costs also include software subscriptions for support services, facilities and equipment costs, depreciation, amortization of acquired customer relationship intangible assets, gains and losses on disposal of fixed assets, indirect taxes, accrued legal contingencies and settlements, and other general overhead. General and administrative costs are expensed as incurred.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Other operating expense, net

Other operating expense, net includes realized gains and losses resulting from the settlement of derivative instruments and fair value gains and losses related to derivatives and derivatives designated in qualifying fair value hedge accounting relationships.

Other operating expense, net also includes the cost of the Company’s crypto assets used to fulfill customer accommodation transactions. Periodically, as an accommodation to customers, the Company may fulfill customer transactions using its own crypto assets. The Company has custody and control of the crypto assets prior to the sale to the customer. Accordingly, the Company records the total value of the sale in other revenue and the cost of the crypto asset in other operating expense, net. Contributions towards political action committees are also included in other operating expense, net.

Other (income) expense, net

Other (income) expense, net includes net gains on the repurchase of certain of the Company’s long-term debt, realized foreign exchange gains and losses resulting from the settlement of the Company’s foreign currency assets and liabilities, and unrealized foreign exchange impacts resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies, and impairment recognized on certain strategic equity investments in privately held companies without readily determinable fair values and gains and losses on investments, net, which consists primarily of realized and unrealized gains and losses from fair value adjustments. Unrealized gains and losses from fair value adjustments on certain financial instruments are also included in other (income) expense, net.

Income taxes

The Company accounts for income taxes using the asset and liability method whereby deferred tax asset and liability account balances are determined based on temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when management estimates that it is more likely than not that deferred tax assets will not be realized. Realization of deferred tax assets is dependent upon future pre-tax earnings, the reversal of temporary differences between book and tax income, and the expected tax rates in future periods.

The Company is required to evaluate the tax positions taken in the course of preparing its tax returns to determine whether tax positions are more likely than not of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax expense in the current year. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount that is initially recognized. It is the Company’s practice to recognize interest and penalties related to income tax matters in income tax expense.

For U.S. federal tax purposes, crypto asset transactions are treated on the same tax principles as property transactions. The Company recognizes a gain or loss when crypto assets are exchanged for other property, in the amount of the difference between the fair market value of the property received and the tax basis of the exchanged crypto assets. Receipts of crypto assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Net income (loss) per share

The Company computes net income (loss) per share using the two-class method required for participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s preferred stock and certain of its restricted common stock were deemed participating securities. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses.

Basic net income (loss) per share is computed using the weighted-average number of outstanding shares of common stock during the period. Diluted net income (loss) per share is computed using the weighted-average number of outstanding shares of common stock and, when dilutive, potential shares of common stock outstanding during the period. Potential shares of common stock consist of incremental shares issuable upon the assumed exercise of stock options and warrants, vesting of RSUs, vesting of restricted common stock, conversion of the Company’s preferred stock and convertible notes, and settlement of contingent consideration.

Segment reporting

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (the “CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a global consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it operates as one operating segment and one reportable segment.

Recent accounting pronouncements

Accounting pronouncements pending adoption

On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that entities disclose specific categories in their rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The new standard is effective for the Company beginning December 15, 2024, with early adoption permitted effective for fiscal years beginning January 1, 2024. The Company is currently evaluating the impact of adopting the standard.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

On December 14, 2023, FASB issued Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which requires entities that hold crypto assets to subsequently measure such assets at fair value with changes recognized in net income each reporting period. The guidance also requires crypto assets measured at fair value to be presented separately from other intangible assets on the balance sheet and changes in the fair value measurement of crypto assets to be presented separately on the income statement from changes in the carrying amounts of other intangible assets. The new standard is effective for the Company beginning December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-08 on January 1, 2024 and will apply the modified retrospective transition approach. While the Company is in the process of finalizing implementation, based on a preliminary assessment, the Company anticipates it will recognize an incremental $720 million to $760 million increase in fair value on crypto assets held with the corresponding cumulative-effect adjustment amount recorded to the opening balance of retained earnings.

On November 27, 2023, FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in ASU 2023-07 are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

3. RESTRUCTURING

2023 Restructuring

In January 2023, the Company announced and completed a restructuring impacting approximately 21% of the Company’s headcount as of December 31, 2022 (the “2023 Restructuring”). The 2023 Restructuring was intended to manage the Company’s operating expenses in response to the ongoing market conditions impacting the cryptoeconomy and ongoing business prioritization efforts. As a result, approximately 950 employees in various departments and locations were terminated. As part of their termination, they were given separation pay and other personnel benefits.

The Company does not expect to incur any additional charges in connection with the 2023 Restructuring and the cash payments associated with the restructuring were completed during the third quarter of 2023. The following expenses were recognized within restructuring expenses in the consolidated statements of operations during the year ended December 31, 2023 (in thousands):


	Year Ended December 31, 2023
Separation pay	$	56,733
Stock-based compensation(1)	84,042
Other personnel costs	1,819
Total	$	142,594

(1)Represents stock-based compensation expenditures for the year ended December 31, 2023 relating to the acceleration of the vesting of outstanding equity awards in accordance with the terms of such awards.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The following table summarizes the balance of the 2023 Restructuring reserve and the changes in the reserve as of and for the year ended December 31, 2023 (in thousands):


	Expenses Incurred(1)		Payments		Adjustments(2)		Accrued Balance as of December 31, 2023
Separation pay	$	57,745	$	(56,733)	$	(1,012)	$	—
Other personnel costs	2,702		(1,819)		(883)		—
Total	$	60,447	$	(58,552)	$	(1,895)	$	—

(1)Excludes stock-based compensation as it was not reflected in the Company’s restructuring reserve on the consolidated balance sheets.

(2)Reductions of $1.0 million and $0.9 million during the year ended December 31, 2023 were due to the release of accruals for certain separation pay expenses and other personnel costs, respectively, recorded as of March 31, 2023, which were not utilized.

2022 Restructuring

In June 2022, the Company announced and completed a restructuring impacting approximately 18% of the Company’s headcount as of June 10, 2022 (the “2022 Restructuring”). This strategic reduction of the existing global workforce was intended to manage the Company’s operating expenses in response to market conditions and ongoing business prioritization efforts. As a result, approximately 1,100 employees in various departments and locations were terminated. As part of their termination, they were given separation pay and other personnel benefits. The Company did not incur any additional charges related to the 2022 Restructuring. The cash payments associated with the 2022 Restructuring were substantially completed during the third quarter of 2022 and the remaining balance was fully paid out during the year ended December 31, 2022.

The following expenses were recognized within restructuring expenses in the consolidated statements of operations for the year ended December 31, 2022 (in thousands):


	Year Ended December 31, 2022
Separation pay	$	38,741

Other personnel costs	1,962
Total	$	40,703

The following table summarizes the balance of the 2022 Restructuring reserve and the changes in the reserve as of and for the year ended December 31, 2022 (in thousands):


	Expenses Incurred		Payments		Adjustments		Accrued Balance as of December 31, 2022
Separation pay	$	39,259	$	(38,741)	$	(518)	$	—
Other personnel costs	3,194		(1,962)		(1,232)		—
Total	$	42,453	$	(40,703)	$	(1,750)	$	—

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

4. ACQUISITIONS

Information on acquisitions completed during the periods presented is set forth below. The impact of these acquisitions was not considered significant to the consolidated financial statements for the periods presented, and pro forma financial information has not been provided.

2023 acquisitions

One River Digital Asset Management, LLC

On March 3, 2023, the Company completed the acquisition of One River Digital Asset Management, LLC (“ORDAM”) by acquiring all issued and outstanding membership units of ORDAM. ORDAM is an institutional digital asset manager which is registered as an investment adviser with the SEC. The Company believes the acquisition aligns with the Company’s long-term strategy to unlock further opportunities for institutions to participate in the cryptoeconomy.

Prior to the acquisition, the Company held a minority ownership stake in ORDAM, which was accounted for as a cost method investment. In accordance with ASC Topic 805, Business Combinations, the acquisition was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the cost method investment was remeasured to fair value as of the acquisition date. As the fair value of the cost method investment was equal to its carrying value, no gain or loss on remeasurement was recorded on the acquisition date.

The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and time-to-market advantages. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date). Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

The total consideration transferred in the acquisition was $96.8 million, consisting of the following (in thousands):


Cash	$	30,830
Cash payable	1,005
Previously-held interest on acquisition date	20,000
Class A common stock of the Company	44,995
Total purchase consideration	$	96,830

Included in the purchase consideration are $6.0 million in cash and 119,991 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The cash and shares subject to the indemnity holdback will be released 18 months after the closing date of the transaction.

The results of operations and the provisional fair values of the assets acquired and liabilities assumed have been included in the consolidated financial statements as of the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):


Goodwill	$	65,764
Intangible assets, net	21,100
Other assets and liabilities, net	9,966
Net assets acquired	$	96,830

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):


	Fair Value		Useful Life at Acquisition (in years)
Licenses	$	1,100	Indefinite
Customer relationships	17,100		6
In-process research and development (“IPR&D”)	2,900		N/A

Customer relationships will be amortized on a straight-line basis over their respective useful lives to general and administrative expense. The licenses have an indefinite useful life and will not be amortized. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to forecasted revenues and expenses, and costs to recreate the IPR&D and obtain the licenses.

Total acquisition costs of $2.6 million were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated statements of operations.

2022 acquisitions

Unbound Security, Inc.

On January 4, 2022, the Company completed the acquisition of Unbound Security, Inc. (“Unbound”) by acquiring all issued and outstanding shares of capital stock and stock options of Unbound. Unbound is a pioneer in a number of cryptographic security technologies, which the Company believes will play a key role in the Company’s product and security roadmap.

In accordance with ASC Topic 805, Business Combinations, the acquisition was accounted for as a business combination under the acquisition method. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, synergies, and the use of purchased technology to develop future products and technologies. During the year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $4.1 million and a corresponding reduction in goodwill.

The total consideration transferred in the acquisition was $258.0 million, consisting of the following (in thousands):


Cash	$	151,424
Cash payable	126
Class A common stock of the Company	103,977
RSUs for shares of the Company’s Class A common stock	2,457
Total purchase consideration	$	257,984

Included in the purchase consideration are $21.7 million in cash and 85,324 shares of the Company’s Class A common stock that were subject to an indemnity holdback. The cash and shares subject to the indemnity holdback were released within 18 months from the closing date of the transaction.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the consolidated financial statements from the date of acquisition. The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition (in thousands):


Goodwill	$	222,732
Intangible assets	28,500
Other assets and liabilities, net	6,752
Net assets acquired	$	257,984

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):


	Fair Value		Useful Life at Acquisition (in Years)
Developed technology	$	15,700	1 - 5
IPR&D	2,500		N/A
Customer relationships	10,300		2

The intangible assets will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative expenses for customer relationships. Amortization of the IPR&D will be recognized in technology and development expenses once the research and development is placed into service as internally developed software. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to development costs and profit, costs to recreate customer relationships, market participation profit, and opportunity cost.

Total acquisition costs of $3.0 million were incurred in relation to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated statements of operations.

FairXchange, Inc.

On February 1, 2022, the Company completed the acquisition of FairXchange, Inc. (“FairX”) by acquiring all issued and outstanding shares of capital stock, stock options and warrants of FairX. FairX is a derivatives exchange which is registered with the U.S. Commodity Futures Trading Commission as a designated contract market (“DCM”) and the Company believes it has been a key stepping stone on the Company’s path to offer crypto derivatives to consumers and institutional customers in the United States.

In accordance with ASC Topic 805, Business Combinations, the acquisition was accounted for as a business combination under the acquisition method. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and the use of purchased technology to develop future products and technologies. During the year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $0.3 million and a corresponding reduction in goodwill.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The total consideration transferred in the acquisition was $275.1 million, consisting of the following (in thousands):


Cash	$	56,726
Cash payable	10,442
Class A common stock of the Company - issued	174,229
Class A common stock of the Company - to be issued	33,693
Total purchase consideration	$	275,090

The aggregate purchase consideration includes 170,397 shares of the Company’s Class A common stock to be issued after the acquisition date. The fair value of these shares on the acquisition date is included in additional paid-in capital. Additionally, included in the purchase consideration are $4.7 million in cash and 83,035 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The cash and shares remain subject to an indemnity holdback.


Goodwill	$	231,685
Intangible assets	41,000
Other assets and liabilities, net	2,405
Net assets acquired	$	275,090

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):


	Fair Value		Useful Life at Acquisition (in Years)
DCM License	$	26,900	Indefinite
Developed technology	10,700		5
Trading relationships	3,400		3

The developed technology and trading relationships will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative for trading relationships. The DCM license has an indefinite useful life and will not be amortized. Management applied significant judgment in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to forecasted revenues and expenses, development costs and profit, costs to recreate trading relationships, market participation profit, and opportunity cost.

Total acquisition costs of $1.1 million were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated statements of operations.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

2021 acquisitions

Bison Trails

On February 8, 2021, the Company completed the acquisition of Bison Trails Co. (“Bison Trails”) by acquiring all issued and outstanding common stock and stock options of Bison Trails. Bison Trails is a platform-as-a-service company that provides a suite of easy-to-use blockchain infrastructure products and services on multiple networks to custodians, exchanges and funds.

Prior to the acquisition, the Company held a minority ownership stake in Bison Trails, which was accounted for as a cost method investment. In accordance with ASC Topic 805, Business Combinations, the acquisition was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the cost method investment was remeasured to fair value as of the acquisition date. The Company considered multiple factors in determining the fair value of the previously held cost method investment, including the price negotiated with the selling shareholders and current trading multiples for comparable companies. Based on this analysis, the Company recognized an $8.8 million gain on remeasurement, which was recorded in other expense (income), net in the consolidated statements of operations on the acquisition date.

The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and the use of purchased technology to develop future products and technologies.

The total consideration transferred in the acquisition was $457.3 million, consisting of the following (in thousands):


Class A common stock of the Company	$	389,314
Previously held interest on acquisition date	10,863
Cash	28,726
Replacement of Bison Trails options	28,365
Total purchase consideration	$	457,268

Included in the purchase consideration are 496,434 shares of the Company’s Class A common stock that are subject to an indemnity holdback. The shares subject to the indemnity holdback were released 18 months after the closing date of the transaction.

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the consolidated financial statements from the date of acquisition. The following table summarizes the estimated fair values of assets acquired and liabilities assumed using a cost-based approach (in thousands):


Goodwill	$	404,167
Intangible assets	39,100
Other assets and liabilities, net	14,001
Net assets acquired	$	457,268

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition (in thousands, except for years data):


	Fair Value		Useful Life at Acquisition (in Years)
Developed technology	$	36,000	3
IPR&D	1,200		N/A
User base	1,900		3

The intangible assets will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative expenses for user base. Amortization of the IPR&D will be recognized in technology and development expenses once the research and development is placed into service as internally developed software. Management applied significant judgement in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to development costs and profit, costs to recreate customer relationships, market participation profit, and opportunity cost.

Total acquisition costs of $3.7 million were incurred related to the acquisition, which were recognized as an expense and included in general and administrative expenses in the consolidated statements of operations.

Other acquisitions

During the year ended December 31, 2021, the Company also completed five other acquisitions that were not material individually, but were material when aggregated. In each of these acquisitions the Company acquired all issued and outstanding common stock and stock options of the acquiree.

The total purchase consideration in each acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition dates, with the excess recorded as goodwill. During the year ended December 31, 2022, measurement period adjustments associated with deferred tax assets were recorded, resulting in an increase in other non-current assets of $1.9 million and a corresponding reduction in goodwill.

The total consideration transferred in these acquisitions was $211.0 million, consisting of the following (in thousands):


Class A common stock of the Company - issued	$	65,717
Class A common stock of the Company - to be issued	58,173
RSUs	3,019
Cash	62,425
Cash payable	5,918
Contingent consideration arrangement	15,752
Total purchase consideration	$	211,004

The aggregate purchase consideration included 160,840 shares of the Company’s Class A common stock which was issued six months after the respective acquisition dates. The fair value of these shares on the respective acquisition dates was included in additional paid-in capital. Additionally, 51,619 shares of the Company’s Class A common stock included in the aggregate purchase consideration that are to be issued, are subject to an indemnity holdback. The shares subject to the indemnity holdback were released between 15 and 18 months after the closing date of each transaction.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Also included in the aggregate purchase consideration was the original estimated fair value of the contingent consideration arrangement agreed to in one of the acquisitions. The contingent consideration consists of two separate tranches. The first tranche will be settled one year after the closing date of the transaction and may result in delivery of up to 75,534 shares of the Company’s Class A common stock if specified revenue targets are met during the first year after the closing date. The second tranche will be settled two years after the closing date of the transaction and may result in delivery of up to another 75,534 shares of the Company’s Class A common stock, if specified revenue targets are met during the second year after the closing date. For each tranche, the revenue targets are adjusted for changes in the combined Bitcoin and Ethereum market capitalization since the closing date. The total number of the Company’s Class A common stock issued to settle the contingent consideration arrangement will be adjusted downward in proportion to recognized revenues that do not meet the specified revenue targets.

In September 2022 and October 2023, upon resolution of the contingencies and determination of the number of shares of the Company’s Class A common stock to be issued under the first and second tranche of the contingent consideration arrangement, respectively, the Company reclassified the value of the first and second tranches from other non-current liabilities into additional paid-in capital on the consolidated balance sheets.

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the consolidated financial statements from the respective dates of acquisition. The following table summarizes the aggregate estimated fair values of assets acquired and liabilities assumed using a cost-based approach (in thousands):


Goodwill	$	144,379
Intangible assets	62,100
Other assets and liabilities, net	4,525
Net assets acquired	$	211,004

The excess of aggregate purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill of $144.4 million, of which $77.1 million is expected to be deductible for U.S. tax purposes. The goodwill balance is primarily attributed to the assembled workforce, market presence, synergies, and the use of purchased technology to develop future products and technologies.

The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the dates of acquisition (in thousands, except for years data):


	Fair Value		Useful Life at Acquisition (in Years)
Developed technology	$	45,900	2.5
User base	1,000		2.5
IPR&D	2,300		N/A
Customer relationships	12,900		4.3

The intangible assets will be amortized on a straight-line basis over their respective useful lives to technology and development expenses for developed technology and general and administrative expenses for customer relationships and user base. Amortization of the IPR&D will be recognized in technology and development expenses once the research and development is placed into service as internally developed software. Management applied significant judgement in determining the fair value of intangible assets, which involved the use of estimates and assumptions with respect to development costs and profit, costs to recreate customer relationships, market participation profit, and opportunity cost. These valuations incorporate significant unobservable inputs classified as Level 3.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Total acquisition costs of $4.3 million were incurred related to these other acquisitions, which were recognized as expenses and included in general and administrative expenses in the consolidated statements of operations. The Company also entered into employment agreements with key employees of the acquirees, which included stock-based compensation arrangements. In conjunction with these agreements, the Company recognized $5.5 million of compensation expenses on the acquisition dates included in technology and development expenses. Stock-based compensation arrangements offered to these key employees with vesting conditions will be recognized as compensation expense in future periods. See Note 18. Stock-Based Compensation, for additional details regarding stock-based compensation issued to employees.

5. REVENUE

The following table presents revenue of the Company disaggregated by revenue source (in thousands):


	Year Ended December 31,
		2023		2022		2021
Net revenue
Transaction revenue









Consumer, net		$	1,429,490	$	2,236,900	$	6,490,992
Institutional, net		90,164		119,344		346,274

Total transaction revenue		1,519,654		2,356,244		6,837,266
Subscription and services revenue
Stablecoin revenue		694,247		245,710		9,882
Blockchain rewards		330,885		275,507		223,055

Interest income		173,914		81,246		15,953
Custodial fee revenue		69,501		79,847		136,293

Other subscription and services revenue		138,339		110,261		132,304
Total subscription and services revenue		1,406,886		792,571		517,487
Total net revenue		2,926,540		3,148,815		7,354,753
Other revenue
Corporate interest and other income		181,827		44,768		2,141
Crypto asset sales revenue		16		625		482,550
Total other revenue		181,843		45,393		484,691
Total revenue		$	3,108,383	$	3,194,208	$	7,839,444

Revenue by geographic location

In the table below are the revenues disaggregated by geography, based on domicile of the customers, as applicable (in thousands):


	Year Ended December 31,
		2023		2022		2021
United States		$	2,725,620	$	2,684,425	$	6,339,270
Rest of the World(1)		382,763		509,783		1,500,174
Total revenue		$	3,108,383	$	3,194,208	$	7,839,444

(1)No other individual country accounted for more than 10% of total revenue.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

6. ACCOUNTS AND LOANS RECEIVABLE, NET OF ALLOWANCE

Accounts and loans receivable, net of allowance consisted of the following (in thousands):


	December 31,		December 31,
	2023		2022
Accounts receivable
Stablecoin revenue receivable	$	57,885	$	179,996

Customer fee revenue receivable(1)	23,603		23,014
Other accounts receivable(1)	109,361		28,837
Gross accounts receivable	190,849		231,847
Allowance for doubtful accounts receivable	(22,559)		(11,500)
Net accounts receivable	168,290		220,347
Loans receivable(2)
Fiat loans receivable(3)	171,196		98,203
Crypto asset loans receivable	22,229		85,826
Total loans receivable	193,425		184,029

Total accounts and loans receivable, net of allowance	$	361,715	$	404,376

(1)Includes accounts receivable denominated in crypto assets. See Note 15. Derivatives for additional details.

(2)As of December 31, 2023 and 2022, loans receivable did not include $205.6 million and $2.8 million of USDC loaned, respectively, as these loaned assets did not meet the criteria for derecognition.

(3)As of December 31, 2023, the entire balance comprised institutional fiat loans, while as of December 31, 2022, the entire balance comprised consumer fiat loans. Consumer fiat loans were discontinued in November 2023.

As of December 31, 2023 and 2022, there were no loans receivable past due.

7. LEASES

The Company has operating leases for corporate offices. The leases have remaining lease terms of less than one year to three years. The leases generally contain options to extend or terminate the lease. However, these were not included in determining the lease terms as the Company is not reasonably certain to exercise those options.

The components of lease cost were as follows (in thousands):


	Year Ended December 31,
	2023		2022		2021
Operating lease cost	$	40,429	$	36,724	$	34,074
Short-term lease cost	4,304		707		374

Total lease cost	$	44,733	$	37,431	$	34,448

Other information related to leases was as follows as of:


	December 31,
	2023		2022
Weighted-average remaining lease term (in years)	1.5		1.2
Weighted-average discount rate	4.05	%	3.01	%

The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate because the interest rate implicit in the leases is not readily determinable. The Company’s incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Maturities of lease liabilities were as follows (in thousands):


2024	$	11,235
2025	3,124
2026	792



Total lease payments	15,151
Less imputed interest	(428)
Total	$	14,723

430 California office space

In February 2023, the Company entered into an early termination agreement for its remaining office space lease in San Francisco, California, which terminated on March 31, 2023. The Company paid a termination fee of $25.0 million and committed to spend $2.0 million at the lessor’s other properties by March 31, 2025. These expenses were recognized within the general and administration expenses in the consolidated statements of operations during the year ended December 31, 2023.

8. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following (in thousands):


	December 31,
	2023		2022
Capitalized software	$	293,467	$	198,537
Leasehold improvements	17,131		45,262
Furniture and fixtures	125		7,217
Computers and equipment	2,554		5,852

Total property and equipment, gross	313,277		256,868
Accumulated depreciation and amortization	(120,727)		(85,015)
Total property and equipment, net	$	192,550	$	171,853

Depreciation and amortization expense was $70.0 million, $48.0 million, and $18.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total additions to capitalized software were $112.0 million, $178.6 million and $22.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. During the years ended December 31, 2023, 2022 and 2021, the Company recorded impairment charges of $18.3 million, $21.8 million, and $0, respectively, related to its property and equipment. Impairment expense is included in other operating expense, net in the consolidated statements of operations.

Long-lived assets, which consisted of property and equipment, net and operating lease ROU assets, by geography were as follows (in thousands):


	December 31,
	2023		2022
United States	$	198,810	$	229,737
Rest of the World(1)	6,477		11,473
Total long-lived assets	$	205,287	$	241,210

(1)No other individual country accounted for more than 10% of total long-lived assets.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

9. GOODWILL, INTANGIBLE ASSETS, NET, AND CRYPTO ASSETS HELD

Goodwill

The following table reflects the changes in the carrying amount of goodwill (in thousands):


	Year Ended December 31,
	2023		2022
Balance, beginning of period	$	1,073,906	$	625,758
Additions due to business combinations	65,764		454,417
Measurement period adjustments(1)	—		(6,269)
Balance, end of period	$	1,139,670	$	1,073,906

(1)The measurement period adjustments during the year ended December 31, 2022 consisted of $4.1 million, $0.3 million and $1.9 million related to the Unbound acquisition, the FairX acquisition, and certain other acquisitions that were material when aggregated, respectively, and which were associated with the changes in deferred tax assets as a result of changes in estimates. There were no measurement period adjustments during the year ended December 31, 2023.

There was no impairment recognized against goodwill at the beginning or end of the periods presented.

Intangible assets, net

Intangible assets, net and their associated weighted average remaining useful lives (“Life”) consisted of the following (in thousands, except years data):


	December 31, 2023							December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Life	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Life

Amortizing intangible assets
Acquired developed technology	$	124,291	$	(105,139)	$	19,152	2.5	$	126,692	$	(81,172)	$	45,520	2.3

Customer relationships	103,791		(66,279)		37,512		3.1	86,691		(45,717)		40,974		2.6


Assembled workforce	60,800		(60,800)		—		0	60,800		(44,857)		15,943		0.4
Other	5,802		(4,294)		1,508		1.0	10,676		(4,834)		5,842		1.7
Indefinite-lived intangible assets

Licenses	28,000		—		28,000		N/A	26,900		—		26,900		N/A
Other	250		—		250		N/A	250		—		250		N/A
Total	$	322,934	$	(236,512)	$	86,422		$	312,009	$	(176,580)	$	135,429

Amortization expense of intangible assets was $69.6 million, $106.1 million and $45.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company estimates that there is no significant residual value related to its amortizing intangible assets.

The Company recorded no material intangible asset impairment charges during the years ended December 31, 2023, 2022 and 2021. Impairment expense is included in technology and development expense in the consolidated statements of operations.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The expected future amortization expense for amortizing intangible assets as of December 31, 2023 is as follows (in thousands):


2024	25,649
2025	17,400
2026	8,782
2027	3,026
2028	2,855
Thereafter	460
Total expected future amortization expense	$	58,172

Crypto assets held

Crypto assets held consisted of the following (in thousands):


	December 31,		December 31,
	2023		2022
Recorded at impaired cost
Crypto assets held as investments	$	330,610	$	155,251
Crypto assets held for operating purposes	74,103		67,577

Total crypto assets held recorded at impaired cost	404,713		222,828
Recorded at fair value(1)
Crypto assets held as investments	—		133,416

Crypto assets borrowed	45,212		68,149
Total crypto assets held recorded at fair value	45,212		201,565
Total crypto assets held	$	449,925	$	424,393

(1)Recorded at fair value as these crypto assets are held as the hedged item in qualifying fair value hedges.

Crypto asset impairment, net comprised the following (in thousands):


	Year Ended December 31,
	2023		2022		2021
Gross crypto asset impairment expense	$	96,783	$	757,257	$	329,152
Recoveries	(131,458)		(35,046)		(175,992)
Crypto asset impairment, net	$	(34,675)	$	722,211	$	153,160

The Company records gross impairment charges when the observed market price of crypto assets held decreases below the carrying value. The Company may later recover impairments through subsequent crypto asset sales and disposals. Collectively, these activities are shown as crypto asset impairment, net in the consolidated statements of operations.

See Note 15. Derivatives, for additional details regarding crypto assets held designated as hedged items in fair value hedges. See Note 16. Fair Value Measurements, for additional details regarding the carrying value of the Company’s crypto assets held that are recorded at fair value.

When the Company borrows crypto assets, it may be required to pledge collateral to maintain a required collateral percentage. See Note 13. Collateral, for additional details regarding assets pledged as collateral.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

10. CUSTOMER ASSETS AND LIABILITIES

The following table presents customers’ cash and safeguarded crypto positions (in thousands):


	December 31,		December 31,
	2023		2022
Customer custodial funds	$	4,570,845	$	5,041,119
Safeguarding customer crypto assets	192,583,060		75,413,188
Total customer assets	$	197,153,905	$	80,454,307

Customer custodial cash liabilities	$	4,570,845	$	4,829,587
Safeguarding customer crypto liabilities	192,583,060		75,413,188
Total customer liabilities	$	197,153,905	$	80,242,775

During the years ended December 31, 2023 and 2022, no losses were incurred in connection with safeguarding customer crypto assets.

The following table sets forth the fair values of safeguarding customer crypto assets that were greater than 5% of the total safeguarding customer crypto assets recorded, as shown on the consolidated balance sheets (in thousands, except percentages):


	December 31, 2023				December 31, 2022
	Fair Value		Percentage of Total(1)		Fair Value		Percentage of Total(1)
Bitcoin	$	89,864,637	47	%	$	32,468,926	43	%
Ethereum(2)	40,200,059		21	%	20,858,121		28	%
Solana	12,906,278		6	%	1,233,451		1	%
Other crypto assets	49,612,086		26	%	20,852,690		28	%
Total safeguarding customer crypto assets	$	192,583,060	100	%	$	75,413,188	100	%

(1)As of December 31, 2023 and 2022, no assets other than Bitcoin, Ethereum, and Solana individually represented more than 5% of total safeguarding customer crypto assets.

(2)As of December 31, 2023 and 2022, Ethereum included $10.1 billion and $3.0 billion, respectively, of staked Ethereum.

See Note 16. Fair Value Measurements, for additional details regarding the safeguarding customer crypto assets and safeguarding customer crypto liabilities.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

11. PREPAID EXPENSES AND OTHER CURRENT AND NON-CURRENT ASSETS

Prepaid expenses and other current assets and other non-current assets consisted of the following (in thousands):


	December 31,		December 31,
	2023		2022
Prepaid expenses and other current assets
Prepaid expenses	$	79,552	$	98,204
Assets pledged as collateral(1)	53,071		100,007
Other	16,191		18,837
Total prepaid expenses and other current assets	$	148,814	$	217,048

Other non-current assets
Strategic investments(2)	$	343,045	$	326,683

Deposits	16,250		10,989
Other	3,590		17,257
Total other non-current assets	$	362,885	$	354,929

(1) Includes $51.9 million and $58.4 million as of December 31, 2023 and 2022, respectively, of the right to receive a fixed amount of USDC and BTC pledged as collateral. See Note 13. Collateral, for additional details on assets pledged as collateral.

(2) Includes $12.7 million and $11.4 million as of December 31, 2023 and 2022, respectively, of strategic investments in tokens and debt securities that are recorded at their impaired cost basis.

The Company acquired a 50% interest in Centre Consortium LLC (“Centre”) during August 2019. The Company had significant influence over the entity, but did not have power or control. The investment was included in Other under other non-current assets in the table above. On August 18, 2023, the Company entered into a share transfer agreement to exchange its 50% interest in Centre to its joint venture partner, Circle US Holdings, Inc., for 3.5% of the fully diluted equity of Circle Internet Financial Limited at an estimated fair value of $51.1 million, which is included in strategic investments in the tables within this Note and is accounted for under the measurement alternative. In connection with this transaction, the Centre joint venture was terminated, and the Company recorded a gain of $49.9 million, which is included in other (income) expense, net in the consolidated statement of operations during the year ended December 31, 2023.

Measurement alternative investments

The changes in the carrying value of strategic investments accounted for under the measurement alternative are presented below (in thousands):


	Year Ended December 31,
	2023		2022
Carrying amount, beginning of period	$	315,285	$	352,431
Net additions(1)	60,979		62,975
Upward adjustments	62		900
Previously held interest in ORDAM (see Note 4)	(20,000)		—
Impairments and downward adjustments	(25,980)		(101,021)

Carrying amount, end of period	$	330,346	$	315,285

(1)Net additions include additions from purchases and reductions due to exits of securities and reclassifications due to changes to capital structure.

Upward adjustments, impairments, and downward adjustments from remeasurement of investments are included in other (income) expense, net in the consolidated statements of operations. As of December

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

31, 2023, cumulative upward adjustments for investments held as of that date were $4.9 million and cumulative impairments and downward adjustments were $127.0 million. As of December 31, 2022, cumulative upward adjustments for investments held as of that date were $4.9 million and cumulative impairments and downward adjustments were $102.0 million.

12. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following (in thousands):


	December 31,		December 31,
	2023		2022
Accrued payroll and payroll related	$	224,237	$	90,257
Other accrued expenses	89,254		75,532
Income taxes payable	17,366		5,534
Obligation to return collateral(1)	1,063		26,874
Short-term borrowings	—		20,519
Other payables(2)	115,130		112,520
Total accrued expenses and other current liabilities	$	447,050	$	331,236

(1)See Note 13. Collateral for additional details on obligation to return collateral.

(2)Includes other payables denominated in crypto assets. See Note 15. Derivatives for additional details.

Short-term borrowings include borrowings with open terms or amounts payable within the next 12 months or sooner at the option of the Company or the lender. The weighted average interest rate on these borrowings was 4.49% per annum as of December 31, 2022.

13. COLLATERAL

Company assets pledged as collateral

The Company’s assets pledged as collateral and recognized within prepaid expenses and other current assets in the consolidated balance sheets, consisted of the following (in thousands, except units):


	December 31, 2023			December 31, 2022
	Units	Fair Value		Units	Fair Value

USDC(1)	51,879,705	$	51,880	47,633,897	$	47,634
Bitcoin(2)	—	—		650	10,743
Fiat	N/A	1,191		N/A	41,630
Total		$	53,071		$	100,007

(1) As of December 31, 2023 and 2022, the Company had pledged USDC that served exclusively as collateral for certain crypto asset borrowings with a fair value of at least 100% of the loan amount outstanding.

(2) As of December 31, 2022, the Company had pledged Bitcoin that served exclusively as collateral for fiat loans with a fair value of at least 110% of the loan amount outstanding. No Bitcoin was pledged as collateral as of December 31, 2023.

The Company had $29.6 million and $0 of USDC collateral pledged as of December 31, 2023 and 2022, respectively, not included in the table above nor recognized as assets pledged as collateral in the consolidated balance sheets as they did not meet the derecognition criteria.

See the consolidated balance sheets, Note 2. Summary of Significant Accounting Policies, and Note 15. Derivatives for information on the borrowings associated with this collateral. The aggregate carrying value of these borrowings and related derivatives was $63.0 million and $151.5 million, as of December 31, 2023 and 2022, respectively.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Borrower assets pledged as collateral

The Company’s obligation to return borrower collateral, which is included within accrued expenses and other current liabilities in the consolidated balance sheets, by type of asset pledged as collateral, consisted of the following (in thousands, except units):


	December 31, 2023			December 31, 2022
	Units	Fair Value		Units	Fair Value
USDC	—	$	—	26,873,830	$	26,874
Fiat	N/A	1,063		N/A	—
Total		$	1,063		$	26,874

The Company did not rehypothecate the collateral above at either date, though it had the right to do so.

The Company had $712.6 million and $136.0 million of collateral assets pledged by borrowers as of December 31, 2023 and 2022, respectively, denominated in USDC, fiat, or crypto assets where the Company did not have a right to use the collateral or the collateral did not meet the recognition criteria. These amounts are not included in the table above nor in the consolidated balance sheets as the collateral did not meet the recognition criteria.

See Note 6. Accounts and loans receivable, net of allowance for information on the loans associated with this collateral.

14. INDEBTEDNESS

The components of indebtedness were as follows as of December 31, 2023 (in thousands, except percentages):



Indebtedness	Effective Interest Rate		Principal Amount		Unamortized Debt Discount and Issuance Costs		Net Carrying Amount
0.50% 2026 Convertible Notes due on June 1, 2026	0.98	%	$	1,273,013	$	(15,378)	$	1,257,635
3.38% 2028 Senior Notes due on October 1, 2028	3.57	%	1,000,000		(8,218)		991,782
3.63% 2031 Senior Notes due on October 1, 2031	3.77	%	737,457		(6,917)		730,540
Total			$	3,010,470	$	(30,513)	$	2,979,957

The components of indebtedness were as follows as of December 31, 2022 (in thousands, except percentages):



Indebtedness	Effective Interest Rate		Principal Amount		Unamortized Debt Discount and Issuance Costs		Net Carrying Amount
0.50% 2026 Convertible Notes due on June 1, 2026	0.98	%	$	1,437,500	$	(23,339)	$	1,414,161
3.38% 2028 Senior Notes due on October 1, 2028	3.57	%	1,000,000		(10,022)		989,978
3.63% 2031 Senior Notes due on October 1, 2031	3.77	%	1,000,000		(10,691)		989,309
Total			$	3,437,500	$	(44,052)	$	3,393,448

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Convertible senior notes

In May 2021, the Company issued an aggregate principal amount of $1.4 billion of convertible senior notes due in 2026 (the “2026 Convertible Notes”) pursuant to an indenture, dated May 18, 2021 (the “Convertible Notes Indenture”), between the Company and U.S. Bank National Association, as trustee. The 2026 Convertible Notes were offered and sold in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”).

The 2026 Convertible Notes are senior unsecured obligations of the Company and bear interest at a rate of 0.50% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2021. The 2026 Convertible Notes mature on June 1, 2026, unless earlier converted, redeemed or repurchased. The proceeds received of $1.4 billion were net of a 1% original issue discount. In June 2023, the Company paid $45.5 million to repurchase $64.5 million of aggregate principal amount of the 2026 Convertible Notes with a carrying value of $63.6 million, net of unamortized issuance costs and original issue discount of $0.9 million and legal fees of $0.3 million. In November 2023, the Company paid $80.9 million to repurchase $100.0 million of aggregate principal amount of the 2026 Convertible Notes with a carrying value of $98.8 million, net of unamortized issuance costs and original issue discount of $1.2 million. The Company recorded a corresponding net gain on extinguishment of long-term debt during the year ended December 31, 2023 of $35.8 million in other (income) expense, net within the consolidated statements of operations.

The initial conversion rate and conversion rate for the 2026 Convertible Notes is 2.6994 shares of the Company's Class A common stock per $1,000 principal amount of 2026 Convertible Notes, which is equivalent to an initial conversion price of approximately $370.45 per share of the Class A common stock. The conversion rate and conversion price are subject to customary adjustments under certain circumstances in accordance with the terms of the Convertible Notes Indenture.

The 2026 Convertible Notes will be convertible at the option of the holders before December 1, 2025 only upon the occurrence of certain events, and from and after December 1, 2025, at any time at their election until the close of business on the second scheduled trading day immediately preceding June 1, 2026, only under certain circumstances. Upon conversion, the Company may satisfy its conversion obligation by paying or delivering, as applicable, cash, shares of the Company’s Class A common stock or a combination of cash and shares of the Company’s Class A common stock, at the Company’s election, based on the applicable conversion rate. In addition, if certain corporate events that constitute a make-whole fundamental change (as defined in the Convertible Notes Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time. Additionally, in the event of a corporate event constituting a fundamental change (as defined in the Convertible Notes Indenture), holders of the 2026 Convertible Notes may require the Company to repurchase all or a portion of their 2026 Convertible Notes at a repurchase price equal to 100% of the principal amount of the 2026 Convertible Notes being repurchased, plus accrued and unpaid special interest or additional interest, if any, to, but excluding, the date of the fundamental change repurchase.

Discounts on the 2026 Convertible Notes reflect a 1% original issue discount of $14.4 million and debt issuance costs related to the 2026 Convertible Notes of $19.4 million, which include commissions payable to the initial purchasers and third-party offering costs.

Capped calls

On May 18, 2021, in connection with the pricing of the 2026 Convertible Notes, the Company entered into privately negotiated capped call transactions (the “Capped Calls”) with certain financial institutions (the “option counterparties”) at a cost of $90.1 million. The Capped Calls cover, subject to customary adjustments, the number of shares of the Company’s Class A common stock initially underlying the 2026 Convertible Notes. By entering into the Capped Calls, the Company expects to reduce the potential dilution to its Class A common stock (or, in the event a conversion of the 2026 Convertible Notes is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion of the 2026

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Convertible Notes its Class A common stock price exceeds the conversion price of the 2026 Convertible Notes. The Capped Calls have an initial strike price of approximately $370.45 per share of Class A common stock and an initial cap price of approximately $478.00 per share of Class A common stock.

Senior notes

In September 2021, the Company completed the issuance of an aggregate principal amount of $1.0 billion of senior notes due on October 1, 2028 (the “2028 Senior Notes”) and an aggregate principal amount of $1.0 billion of senior notes due on October 1, 2031 (the “2031 Senior Notes” and together with the 2028 Senior Notes, the “Senior Notes”). The Senior Notes were issued within the United States only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act.

In August and September 2023, the Company paid $177.2 million to repurchase $262.5 million of aggregate principal amount of the 2031 Senior Notes with a carrying value of $259.9 million, net of unamortized issuance costs of $2.6 million and legal fees of $1.1 million. The Company recorded a corresponding net gain on extinguishment of long-term debt during the year of $81.6 million in other (income) expense, net within the consolidated statements of operations.

The Company issued the Senior Notes at par and paid approximately $24.0 million in total debt issuance costs, which includes commissions payable to the initial purchasers and third-party offering costs. Interest on the Senior Notes is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on April 2022 at 3.375% per annum for the 2028 Senior Notes and 3.625% per annum for the 2031 Notes. The entire principal amount of the Senior Notes is due at the time of maturity, unless repurchased or redeemed at an earlier date. The Senior Notes were issued pursuant to an indenture, dated September 17, 2021 (the “Senior Notes Indenture”), among the Company, the Guarantor (as defined below) and U.S. Bank National Association, as trustee.

The Senior Notes are redeemable at the Company’s discretion, in whole or in part, at any time. If redeemed prior to October 1, 2024 for the 2028 Senior Notes and October 1, 2026 for the 2031 Senior Notes, the redemption price is subject to a make-whole premium calculated by reference to then-current U.S. Treasury rates plus a fixed spread, plus any accrued and unpaid interest. If redeemed on or after those respective dates, the make-whole premium does not apply.

In addition, prior to October 1, 2024, the Company may redeem up to 40% of the aggregate principal amount of the Senior Notes with net cash proceeds from certain equity offerings at a redemption price equal to 103.375% of the principal amount of the 2028 Senior Notes to be redeemed and 103.625% of the principal amount of the 2031 Senior Notes to be redeemed, in each case, plus any accrued and unpaid interest. Upon the occurrence of a change of control triggering event (as defined in the Senior Notes Indenture), the Company must offer to repurchase each series of Senior Notes at a repurchase price equal to 101% of the principal amount of the Senior Notes to be repurchased, plus any accrued and unpaid interest, to, but excluding, the applicable repurchase date.

The Senior Notes are guaranteed by one of the Company’s domestic subsidiaries, Coinbase, Inc. (the “Guarantor”).

The indenture governing the Senior Notes contains customary covenants that restrict the ability of the Company and certain of its subsidiaries to incur debt and liens. The Company is not aware of any instances of non-compliance with the covenants as of December 31, 2023.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Interest

The following table summarizes the interest expense for the 2026 Convertible Notes and the Senior Notes (in thousands):


	Year Ended December 31,
	2023		2022		2021
Coupon interest	$	73,861	$	77,235	$	24,129
Amortization of debt discount and issuance costs	8,830		8,653		5,031
Total	$	82,691	$	85,888	$	29,160

15. DERIVATIVES

The following outlines the Company’s derivatives:


Type of Derivative	Description of Derivative	Location of Host Contract and Derivative on Balance Sheets
Crypto asset futures	The Company entered into short positions on futures contracts to minimize the exposure on the change in the fair value price of crypto assets held.	Accounts and loans receivable, net of allowance
Accounts and loans receivable denominated in crypto assets	Accounts receivable denominated in crypto assets: The Company provided services for which, under the contract, the customer pays in crypto assets. The amount of crypto assets are fixed at the time of invoicing. The right to receive fixed amounts of crypto assets consists of a receivable host contract and an embedded forward contract to purchase crypto assets. Crypto asset loans receivable: The Company lends crypto assets to institutions. The amount of crypto assets are fixed at the time of loan origination.	Accounts and loans receivable, net of allowance
Crypto assets pledged as collateral	The Company enters into certain borrowing arrangements that require the Company to post collateral in the form of crypto assets. If the lender has the right to use the crypto asset collateral, the Company presents the collateral pledged as a right to receive a fixed amount of crypto assets.	Prepaid expenses and other current assets
Foreign currency forward contracts	The Company entered into foreign currency forward contracts, with maturities of 12 months or less, to offset the foreign currency exchange risk of its assets and liabilities denominated in foreign currencies. These contracts are not designated as hedging instruments and reduce, but do not entirely eliminate, the impact of foreign currency exchange rate movements on the Company’s assets and liabilities.	Prepaid expenses and other current assets/ Accrued expenses and other current liabilities
Other payables denominated in crypto assets	The Company entered into arrangements that result in the obligation to deliver a fixed amount of crypto assets in the future.	Accrued expenses and other current liabilities
Crypto asset borrowings	The Company borrowed crypto assets that resulted in the obligation to deliver a fixed amount of crypto assets in the future.	Crypto asset borrowings

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Impact of derivatives on the consolidated balance sheets

The following table summarizes the notional amounts of derivative instruments outstanding, measured in U.S. dollar equivalents (in thousands):


	December 31,		December 31,
	2023		2022
Designated as hedging instrument(1)
Crypto asset futures(2)	$	—	$	136,230
Crypto asset borrowings	31,666		80,999

Not designated as hedging instrument
Crypto asset futures(2)	—		12,462
Accounts and loans receivable denominated in crypto assets	16,335		101,598
Crypto assets pledged as collateral	—		13,103
Other payables denominated in crypto assets	20,092		4,267
Crypto asset borrowings	12,503		70,462

(1) For risk management purposes, the Company applies hedge accounting using these derivative instruments in qualifying fair value hedges to primarily hedge the fair value exposure of crypto asset prices.

(2) Derivative notional amounts are reference amounts from which contractual payments or settlement are derived and do not represent a complete measure of the risk profile of the Company’s exposure to derivative instruments.

The following tables summarize information on derivative assets and liabilities that are reflected on the consolidated balance sheets, by accounting designation (in thousands):


	Gross Derivative Assets						Gross Derivative Liabilities
	Not Designated as Hedges		Designated as Hedges		Total Derivative Assets		Not Designated as Hedges		Designated as Hedges		Total Derivative Liabilities
December 31, 2023
Accounts and loans receivable denominated in crypto assets	$	28,065	$	—	$	28,065	$	—	$	—	$	—
Other payables denominated in crypto assets	2,511		—		2,511		3,101		—		3,101



Crypto asset borrowings(1)	26		(25)		1		5,290		13,522		18,812

Total fair value of derivative assets and liabilities	$	30,602	$	(25)	$	30,577	$	8,391	$	13,522	$	21,913


December 31, 2022
Accounts and loans receivable denominated in crypto assets	$	302	$	—	$	302	$	9,146	$	—	$	9,146
Crypto assets pledged as collateral	—		—		—		2,360		—		2,360
Other payables denominated in crypto assets	1,270		—		1,270		5,767		—		5,767


Crypto asset borrowings(1)	2,266		—		2,266		657		1,653		2,310
Total fair value of derivative assets and liabilities	$	3,838	$	—	$	3,838	$	17,930	$	1,653	$	19,583

(1) During the year ended December 31, 2023, the fees on these borrowings ranged from 1.5% to 10.3%. During the year ended December 31, 2022, the fees on these borrowings ranged from 0.0% to 9.0%. During the years ended December 31, 2023 and 2022, the Company incurred $4.8 million and $6.7 million of borrowing fees in crypto assets, respectively. Borrowing fees are included in other operating expense, net in the consolidated statements of operations.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Impact of derivatives on the consolidated statements of operations

Gains (losses) on derivative instruments recognized in the consolidated statements of operations were as follows (in thousands):



	Year Ended December 31, 2023						Year Ended December 31, 2022
	Derivatives		Hedged Items		Income Statement Impact		Derivatives		Hedged Items		Income Statement Impact
Designated as fair value hedging instruments
Crypto asset futures(1)	$	(40,191)	$	46,453	$	6,262	$	13,571	$	(12,994)	$	577
Crypto asset borrowings(1)	(75,249)		117,393		42,144		359,240		(359,528)		(288)

Not designated as hedging instruments
Crypto asset futures(1)	(1,424)		—		(1,424)		1,735		—		1,735
Accounts and loans receivable denominated in crypto assets(2)	28,602		—		28,602		(24,969)		—		(24,969)
Crypto assets pledged as collateral(1)	—		—		—		(2,360)		—		(2,360)
Foreign currency forward contracts(2)	—		—		—		(59,063)		—		(59,063)
Other payables denominated in crypto assets(1)	5,014		—		5,014		5,271		—		5,271
Crypto asset borrowings(1)	(47,160)		—		(47,160)		11,242		—		11,242
Other(1)	4,839		—		4,839		—		—		—
Total	$	(125,569)	$	163,846	$	38,277	$	304,667	$	(372,522)	$	(67,855)

(1)Changes in fair value are recognized in other operating expense, net in the consolidated statements of operations.

(2)Changes in fair value are recognized in other (income) expense, net. Foreign currency forward contracts partially offset gains and losses due to the remeasurement of certain foreign currency denominated assets and liabilities which are also recognized in other (income) expense, net in the consolidated statements of operations.

The following amounts were recorded on the consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the consolidated statements of operations in future periods as an adjustment to other operating expense, net (in thousands):


			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
	Carrying Amount of the Hedged Items		Active Hedging Relationships		Discontinued Hedging Relationships		Total


December 31, 2023
Crypto assets held	$	45,212	$	(3,946)	$	—	$	(3,946)



December 31, 2022
Crypto assets held	$	201,565	$	(562)	$	670	$	108

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

16. FAIR VALUE MEASUREMENTS

The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis (in thousands):


	December 31, 2023						December 31, 2022
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets
Cash equivalents(1)	$	3,682,917	$	—	$	—	$	2,250,065	$	—	$	—
Customer custodial funds(2)	3,301,029		—		—		2,088,132		—		—
Crypto assets held(3)	45,212		—		—		201,565		—		—
Derivative assets(4)	—		30,577		—		—		3,838		—
Crypto asset loans receivable	—		22,229		—		—		85,826		—
Safeguarding customer crypto assets	—		192,583,060		—		—		75,413,188		—
Total assets	$	7,029,158	$	192,635,866	$	—	$	4,539,762	$	75,502,852	$	—

Liabilities

Derivative liabilities(4)	$	—	$	21,913	$	—	$	—	$	19,583	$	—
Safeguarding customer crypto liabilities	—		192,583,060		—		—		75,413,188		—
Contingent consideration arrangement	—		—		—		—		—		1,855
Total liabilities	$	—	$	192,604,973	$	—	$	—	$	75,432,771	$	1,855

(1)Represents money market funds. Excludes $1.4 billion of corporate cash held in deposit at banks and $88.8 million held at venues, which were not measured and recorded at fair value as of December 31, 2023. Excludes $2.0 billion of corporate cash held in deposit at banks and $143.2 million held at venues, which were not measured and recorded at fair value as of December 31, 2022.

(2)Represents money market funds. Excludes customer custodial funds of $1.3 billion and $3.0 billion held in deposit at financial institutions and not measured and recorded at fair value as of December 31, 2023 and 2022, respectively.

(3)Includes crypto assets held that have been designated as hedged items in fair value hedges and excludes crypto assets of $404.7 million and $222.8 million held at cost as of December 31, 2023 and 2022, respectively.

(4)See Note 15. Derivatives for additional details.

The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the years ended December 31, 2023 and 2022.

Safeguarding customer crypto assets and liabilities represent the Company’s obligation to safeguard customer crypto assets. Accordingly, the Company has valued the assets and liabilities using quoted market prices for the underlying crypto assets which is based on Level 2 inputs.

Level 3 contingent consideration arrangement liability

The following table presents a reconciliation of the contingent consideration arrangement measured at fair value on a recurring basis using significant unobservable inputs (in thousands):


	Year Ended December 31,
	2023		2022
Balance, beginning of period	$	1,855	$	14,828

Change in fair value	436		(8,312)
Settlement	(2,291)		(4,661)
Balance, end of period	$	—	$	1,855

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

In connection with the contingent consideration arrangement, the Company issued 57,640 and 28,422 shares of its Class A common stock in 2022 and 2023, respectively, pursuant to the terms of the arrangement. As of December 31, 2023, all contingencies related to this arrangement were resolved. Contingent consideration arrangements are included in other non-current liabilities and changes in fair value are recognized through other (income) expense, net in the consolidated statements of operations.

Assets and liabilities measured and recorded at fair value on a non-recurring basis

The Company’s non-financial assets, such as goodwill, intangible assets, property and equipment, and crypto assets held but not designated in hedging relationships are adjusted to fair value when an impairment charge is recognized. The Company’s strategic investments are also measured at fair value on a non-recurring basis. Such fair value measurements are based predominantly on Level 3 inputs. The carrying value of the Company’s strategic investments is predominantly adjusted based on an Option-Pricing Model that uses publicly available market data of comparable companies and other unobservable inputs including expected volatility, expected time to liquidity, adjustments for other company-specific developments, and the rights and obligations of the securities the Company holds. Fair value of crypto assets held are predominantly based on Level 1 inputs.

Assets and liabilities not measured and recorded at fair value

The Company’s financial instruments, including certain cash and cash equivalents, restricted cash, certain customer custodial funds, USDC, accounts receivable, fiat loans receivable, customer custodial cash liabilities, and short-term borrowings are not measured at fair value. The carrying values of these instruments approximate their fair values due to their liquid or short term nature. If these financial instruments were recorded at fair value, they would be based on Level 1 inputs, except for short-term borrowings and loans receivable which would be based on Level 2 and Level 3 inputs, respectively.

The Company estimates the fair value of its 2026 Convertible Notes and Senior Notes based on quoted prices in markets that are not active, which is considered a Level 2 valuation input. As of December 31, 2023, the estimated fair value of the 2026 Convertible Notes and Senior Notes were $1.2 billion and $1.4 billion, respectively.

17. CAPITAL STOCK

Preferred stock

In connection with the Direct Listing, the Company’s amended and restated certificate of incorporation (the “Restated Certificate of Incorporation”) became effective, which authorized the issuance of 500,000,000 shares of undesignated preferred stock with a par value of $0.00001 per share with rights and preferences, including voting rights, designated from time to time by the Company’s board of directors (the “Board”).

Common stock

Pursuant to the Restated Certificate of Incorporation, the Board is authorized to issue 10,000,000,000 shares of Class A common stock, 500,000,000 shares of Class B common stock, and 500,000,000 shares of undesignated common stock.

Dividend rights

Shares of Class A common stock and Class B common stock will be treated equally, identically and ratably, on a per share basis, with respect to dividends that may be declared by the Board.

Voting rights

Holders of Class A common stock are entitled to one vote per share, and holders of Class B common stock are entitled to 20 votes per share. Holders of Class A common stock and Class B common stock

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

generally vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders of the Company.

Right to receive liquidation distributions

Upon a liquidation, dissolution or winding-up of the Company, the assets legally available for distribution to stockholders would be distributed ratably among the holders of Class A common stock and Class B common stock and any participating preferred stock or new series of common stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock or new series of common stock.

Conversion

Shares of Class B common stock are convertible at any time at the option of the holder into shares of Class A common stock on a one-to-one basis. In addition, each share of Class B common stock will automatically convert into a share of Class A common stock upon a sale or transfer (other than with respect to certain estate planning and other transfers). Further, upon certain events specified in the Restated Certificate of Incorporation, all outstanding shares of Class B common stock will convert automatically into shares of Class A common stock. Once converted into Class A common stock, the Class B common stock will not be reissued.

18. STOCK-BASED COMPENSATION

Stock plans

The Company maintains four equity incentive plans: the 2013 Plan, the 2019 Plan, and the 2021 Plan (together, the “Plans”), and the ESPP. Following the Direct Listing, the Company has only issued awards under the 2021 Plan and the ESPP, and no additional awards will be granted under the 2013 Plan and 2019 Plan. In addition, certain of the Company’s existing options assumed in connection with acquisitions are governed by the terms of the acquired company’s equity awards plan.

In February 2021, the Board approved and adopted the 2021 Plan. The 2021 Plan became effective on March 31, 2021, the date immediately prior to the effective date of the Company’s registration statement for the Direct Listing. The 2021 Plan serves as the successor to the 2019 Plan. Outstanding awards under the 2013 Plan and 2019 Plan continue to be subject to their original terms and conditions. The 2021 Plan provides for the granting of incentive stock options, RSUs, restricted stock, stock appreciation rights and performance and stock bonus awards to assist in attracting, retaining and motivating employees. The number of shares available for grant and issuance under the 2021 Plan will be automatically increased on January 1st of each of the first ten fiscal years during the term of the 2021 Plan by the lesser of (a) five percent of the total number of shares of all classes of the Company’s common stock issued and outstanding on an as converted to common stock basis on each December 31st immediately prior to the date of increase or (b) such number of shares determined by the Board.

As of December 31, 2023, there were 28,948,240 shares of Class A common stock subject to issued and outstanding options, RSUs and PRSUs, and 3,568,760 shares of Class B common stock subject to issued and outstanding options under the Plans. Under the 2021 Plan, there were 49,433,488 shares of Class A common stock available for future issuance.

Stock options

Options granted under the Plans may be either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to Company employees (including officers and directors who are also employees). NSOs may be granted to Company employees and non-employees.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Options under the Plans may be granted for contractual periods of up to ten years and at prices determined by the Board, provided, however, that the exercise price of an ISO and NSO shall not be less than 100% of the estimated fair value of the underlying shares on the date of the grant (110% if granted to a stockholder who owns more than ten percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary).

Under the 2013 Plan and 2019 Plan, options granted to new employees of the Company generally vest over four years and vest at a rate of 25% upon the first anniversary of the issuance date and 1/48 per month thereafter. Refresher options granted to existing employees of the Company generally vest in equal monthly installments over four years. No additional awards have been or will be granted under the 2013 Plan and 2019 Plan following the Company’s Direct Listing.

Under the 2021 Plan, options are granted to executives and eligible non-executive employees which vest in equal quarterly installments over a period of three years.

The 2013 Plan and 2019 Plan allow for a 7 year exercise window post-termination for employees of the Company who have provided at least two years of continuous service to the Company as of their termination date.

A summary of options activity for the year ended December 31, 2023 is as follows (in thousands, except per share and years data):


	Options Outstanding	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Balance at January 1, 2023	31,795	$	23.31	7.0	$	504,222
Granted	843	73.07
Exercised	(3,039)	15.84
Forfeited and cancelled	(902)	40.90

Balance at December 31, 2023	28,697	$	25.01	6.1	4,295,055

Exercisable at December 31, 2023	22,560	$	25.43	6.0	3,371,636
Vested and expected to vest at December 31, 2023	22,593	$	25.42	6.0	3,376,658

During the year ended December 31, 2023, the Company granted stock options for the purchase of 842,617 shares of Class A common stock with a weighted-average grant date fair value of $40.85 per share to certain employees of the Company. The stock options vest over three years at a rate of 1/12 per quarter.

As of December 31, 2023, there was total unrecognized compensation cost of $70.1 million related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately 2.3 years.

The intrinsic value is calculated as the difference between the exercise price of the underlying stock option award and the estimated fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2023, 2022 and 2021 was $226.5 million, $336.3 million and $5.9 billion, respectively.

During the years ended December 31, 2023, 2022 and 2021, 4,567,625, 7,592,673, and 14,966,504 stock options vested with a weighted-average grant date fair value of $15.93, $12.46, and $8.74 per share, respectively.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The assumptions used under the Black-Scholes-Merton Option-Pricing Model to calculate the fair value of the options granted to employees were as follows:


	Year Ended December 31,
	2023		2022		2021
Dividend yield	0.0	%	0.0	%	0.0	%
Expected volatility	90.5	%	59.3	%	44.0	%
Expected term (in years)	5.8		5.8		4.8
Risk-free interest rate	3.9	%	2.1	%	0.5	%

Early exercise of stock options

As of December 31, 2023 and 2022, there were 29,430 and 166,481 shares, respectively, subject to repurchase related to stock options early exercised and not yet vested, but that are expected to vest. Class A common stock purchased pursuant to an early exercise of stock options is not deemed to be outstanding for accounting purposes until those shares vest. The Company excludes unvested shares subject to repurchase in the number of shares outstanding in the consolidated balance sheets and consolidated statements of changes in preferred stock and stockholders’ equity. As of December 31, 2023 and 2022, the Company recorded a liability related to these shares subject to repurchase in the amount of $0.6 million and $3.3 million, respectively, which is included within accrued expenses and other current liabilities on the accompanying consolidated balance sheets.

Chief Executive Officer performance stock options

On August 11, 2020, the Company granted its Chief Executive Officer an option award to purchase up to 9,293,911 shares of Class A common stock, at an exercise price of $23.46 per share. Vesting of the award is dependent on both performance-based and market-based conditions being met. The total grant date fair value of this award was $56.7 million.

The performance condition was contingent on the Company’s registration statement being declared effective by the SEC under the Securities Act. The occurrence of this event was considered to not be probable until such time that it occurred. During April 2021, as a result of the Company’s registration statement being declared effective by the SEC, the performance condition of the option award granted to the Chief Executive Officer was met. No awards vested at that time as none of the accompanying market-based conditions had been met.

The market conditions are contingent on the Company’s Class A common stock price achieving certain stock price target milestones. On July 8, 2021, the first price target of the award was met, resulting in the vesting of 3,159,930 shares of Class A common stock subject to the option award. During the years ended December 31, 2023, 2022 and 2021, compensation expense of $3.9 million, $3.9 million and $29.5 million was recognized related to this award, respectively.

Restricted stock units

The Company grants RSUs that vest upon the satisfaction of a service-based condition. In general, the RSUs vest over a service period ranging from one to four years. Once vested, the RSUs are settled by delivery of Class A common stock.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

A summary of RSU activity for the year ended December 31, 2023 is as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023	5,329	$	127.85
Granted	9,408	58.04
Vested	(10,278)	71.40
Forfeited and cancelled	(1,443)	116.14
Balance at December 31, 2023	3,016	$	108.07

During the years ended December 31, 2022 and 2021, the weighted-average grant date fair value per share granted was $112.35 and $233.24, respectively. During the years ended December 31, 2023, 2022, and 2021, the aggregate fair value as of the vest date of RSUs that vested was $753.9 million, $947.9 million, and $644.2 million, respectively.

In December 2022, the Company modified certain RSU awards held by 1,198 employees to accelerate vesting of the remaining unvested awards on December 21, 2022 instead of the original vest date of February 20, 2023. The modification of awards did not result in any incremental compensation cost, however $36.1 million of stock-based compensation expense was accelerated and recognized upon modification.

As of December 31, 2023, there was total unrecognized compensation cost of $284.2 million related to unvested RSUs. These costs are expected to be recognized over a weighted-average period of approximately 1.3 years.

President & Chief Operating Officer performance award

On April 20, 2023, the Company’s Compensation Committee granted the President & Chief Operating Officer an award of PRSUs covering a target of 401,983 shares of Class A common stock and up to a maximum of 803,966 shares of Class A common stock (the “2023 COO Performance Award”).

Up to 40% of the 2023 COO Performance Award is subject to vesting based upon achievement of certain cumulative revenue and cumulative adjusted EBITDA target values which are separately evaluated for the period commencing January 1, 2023 and ending on December 31, 2025, subject to her continued employment until February 20, 2026 (the “Financial Performance Tranches”). Up to 60% of the 2023 COO Performance Award is subject to vesting in increments based upon a relative shareholder return target value for the three annual periods between January 1, 2023 and December 31, 2025, and the three year period between January 1, 2023 and December 31, 2025, subject to her continued employment through the applicable year end dates (the “Market Tranches”). The total grant date fair value of the Market Tranches of this award was $25.1 million, while the grant date fair value of the Financial Performance Tranches was $19.5 million assuming maximum achievement.

During the year ended December 31, 2023, stock-based compensation expense of $9.8 million was recognized related to this award.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

A summary of PRSU activity for the year ended December 31, 2023 is as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023	—	$	—
Granted	804	55.42


Balance at December 31, 2023	804	$	55.42

As of December 31, 2023, there was total unrecognized compensation cost of $15.3 million related to the unvested Market Tranches of these PRSUs, which are currently expensing. These costs are expected to be recognized over a weighted-average period of approximately 1.9 years. The Company is not yet recognizing expense with respect to the Financial Performance Tranches; the full grant date fair value of these tranches is unrecognized.

Restricted common stock

In connection with the Company’s acquisitions, the Company has issued shares of restricted Class A common stock. Vesting of this restricted Class A common stock is dependent on a service-based vesting condition that is generally satisfied over three years. The Company has the right to repurchase shares at par value when the vesting condition is not satisfied. Activity of restricted Class A common stock is as follows (in thousands, except per share data):


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2023	1,275	$	139.72
Granted	263	64.51
Vested	(966)	132.53
Forfeited and cancelled	(29)	171.85
Balance at December 31, 2023	543	$	114.22

During the years ended December 31, 2022 and 2021, the weighted-average grant date fair value per share granted was $137.05 and $180.33, respectively. During the years ended December 31, 2023, 2022, and 2021, the aggregate fair value as of the vest date of restricted common stock that vested was $56.0 million, $148.6 million, and $65.0 million, respectively.

As of December 31, 2023, there was total unrecognized compensation cost of $33.2 million related to unvested restricted Class A common stock. These costs are expected to be recognized over a weighted-average period of approximately 1.4 years.

Employee Stock Purchase Plan

In February 2021, the Board approved and adopted the ESPP. The ESPP became effective on April 1, 2021, the effective date of the Company’s registration statement for the Direct Listing. The ESPP allows eligible employees the option to purchase shares of the Company’s Class A common stock at a 15% discount, over a series of offering periods through accumulated payroll deductions over the period. The ESPP also includes a look-back provision for the purchase price if the stock price on the purchase date is lower than the stock price on the offering date.

The number of shares available for grant and issuance under the ESPP will be automatically increased on January 1st of each of the first ten fiscal years during the term of the ESPP by the lesser of (a) one percent of the total number of shares of all classes of the Company’s common stock outstanding

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

on an as converted to common stock basis on each December 31st immediately prior to the date of increase or (b) such number of shares determined by the Board or the compensation committee of the Board.

The grant date of the initial offering period was May 3, 2021, and that offering period ended on April 30, 2023. Subsequent offering periods commence each May and November after the start of the initial offering period. For the years ended December 31, 2023, 2022 and 2021, total compensation expense of $17.3 million, $28.4 million and $9.4 million, respectively, was recognized related to the ESPP. As of December 31, 2023 and 2022, the Company recorded a liability of $4.1 million and $6.7 million, respectively related to the accumulated payroll deductions, which are refundable to employees who withdraw from the ESPP. This amount is included within accrued expenses and other current liabilities on the accompanying consolidated balance sheets. As of December 31, 2023, there were 9.0 million shares of Class A common stock available for issuance under the ESPP.

Stock-based compensation expense

Stock-based compensation is included in the following components of expenses on the accompanying consolidated statements of operations (in thousands):


	Year Ended December 31,
		2023		2022		2021
Technology and development		$	476,478	$	1,093,983	$	571,861
Sales and marketing		59,000		76,153		32,944
General and administrative		245,190		395,687		215,880
Restructuring		84,042		—		—
Total		$	864,710	$	1,565,823	$	820,685

During the years ended December 31, 2023, 2022 and 2021, $53.6 million, $118.0 million and $3.5 million of stock-based compensation expense was included in capitalized software, respectively. During the years ended December 31, 2023, 2022, and 2021, the Company recognized an income tax benefit of $205.6 million, $246.6 million, and $1.4 billion, respectively, related to stock-based compensation expense. The income tax benefit related to stock-based compensation expense in 2021 reflects excess tax benefits primarily related to deductible stock option exercises in connection with the Direct Listing.

19. OTHER (INCOME) EXPENSE, NET

Other (income) expense, net consisted of the following (in thousands):


	Year Ended December 31,
		2023		2022		2021
Foreign exchange losses, net		$	10,609	$	161,749	$	40,989
(Gains) losses on strategic investments		(24,368)		101,219		(19,602)
Gain on extinguishment of long-term debt		(117,383)		—		—
Other		(36,441)		2,505		(924)
Total other (income) expense, net		$	(167,583)	$	265,473	$	20,463

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

20. INCOME TAXES

The components of income (loss) before income taxes were attributable to the following regions (in thousands):


	Year Ended December 31,
	2023		2022		2021
Domestic	$	(113,067)	$	(3,071,951)	$	2,977,406
Foreign	36,222		7,369		49,541
Total income (loss) before provision for income taxes	$	(76,845)	$	(3,064,582)	$	3,026,947

Benefit from income taxes consisted of the following (in thousands):


	Year Ended December 31,
	2023		2022		2021
Current
Federal	$	8,761	$	1,654	$	(51,942)
State	24,236		3,985		4,456
Foreign	11,621		22,763		8,642
Total current	44,618		28,402		(38,844)
Deferred
Federal	(218,165)		(361,056)		(438,810)
State	416		(126,713)		(93,959)
Foreign	1,415		19,734		(25,560)
Total deferred	(216,334)		(468,035)		(558,329)
Total benefit from income taxes	$	(171,716)	$	(439,633)	$	(597,173)

The effective income tax rate differs from the statutory federal income tax rate as follows:


	Year Ended December 31,
	2023		2022		2021
U.S. statutory rate	21.00	%	21.00	%	21.00	%
State income taxes, net of federal benefit	6.08		5.04		(4.67)
Foreign rate differential	(0.14)		(0.02)		(1.09)
Non-deductible compensation	(48.93)		(1.34)		0.83
Equity compensation	43.51		(3.43)		(31.95)
Adjustment to prior year provision	24.85		(0.23)		0.14
Research and development (“R&D”) credits	62.20		1.40		(9.60)
Change in valuation allowance	195.59		(6.37)		1.65
Foreign tax credit	6.31		—		—
Foreign Derived Intangible Income (“FDII”)	0.65		—		—
Global Intangible Low Taxed Income (“GILTI”)	(18.55)		(0.94)		—
Uncertain tax positions	(56.06)		(0.60)		3.07
Other	(13.05)		(0.16)		0.89

Effective income tax rate	223.46	%	14.35	%	(19.73)	%

The Company’s effective tax rate of 223.46% for the year ended December 31, 2023 is due primarily to a reduction of a valuation allowance related to impairment charges on crypto assets held and strategic investments and tax benefits related to Federal R&D credits, reduced by certain nondeductible

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

compensation, tax on non-U.S. earnings, and other nondeductible expenses related to political contributions.

The Company’s effective tax rate of 14.35% for the year ended December 31, 2022 reflects a tax benefit on pretax loss reduced by certain nondeductible compensation and a valuation allowance recorded on impairment charges related to crypto assets held and strategic investments.

The Company’s effective tax rate of (19.73)% for the year ended December 31, 2021 reflects a tax benefit on pretax income due primarily to deductible stock option exercises as a result of the Direct Listing, and R&D credits.

The Company’s effective tax rate can be volatile based on the amount of pretax income or loss in the reporting period. For example, when pretax income is lower, the effect of reconciling items to the U.S. statutory rate, such as nondeductible expenses, will have a greater impact on the effective tax rate.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities consisted of the following (in thousands):


	December 31,
	2023		2022
Deferred tax assets
Safeguarded crypto liabilities	$	46,437,843	$	19,086,117
Accruals and reserves	13,847		6,248
Net operating loss carryforward	55,563		396,613
Lease liability	4,494		19,967

Tax credit carryforward	351,003		301,862
Stock-based compensation	21,284		24,527
Intangibles	49,255		27,022
Capitalized expenses	759,789		415,981
Capital losses - realized / unrealized	207,563		225,211

Gross deferred tax assets	47,900,641		20,503,548
Less valuation allowance	(102,250)		(252,258)
Total deferred tax assets	47,798,391		20,251,290

Deferred tax liabilities
Safeguarded crypto assets	(46,437,843)		(19,086,117)
State taxes	(13,169)		(23,212)
Depreciation and amortization	(32,246)		(35,893)

Prepaid expenses	(10,870)		(5,938)
Right of use asset	(3,894)		(18,246)
Installment gain	(10,918)		(13,443)
Other	(17,218)		(21,650)
Total deferred tax liabilities	(46,526,158)		(19,204,499)
Total net deferred tax assets	$	1,272,233	$	1,046,791

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2023, the Company had $1.3 billion in net deferred tax assets. At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, only the portion of the deferred tax asset that is more likely than not to be realized was recognized. However, if the Company is not able to generate sufficient taxable income from its operations in the future, then a valuation allowance to reduce the Company’s U.S. deferred tax assets may be required, which would increase the Company’s expenses in the period the allowance is recognized.

Activity related to the Company’s valuation allowance consisted of the following (in thousands):


	Year Ended December 31,
		2023		2022		2021
Balance, beginning of period		$	252,258	$	54,383	$	5,174
Charged (credited) to expenses		(150,008)		197,875		49,209

Balance, end of period		$	102,250	$	252,258	$	54,383

The Company’s valuation allowance as of December 31, 2023 was lower compared to 2022 driven by the increase in the fair value of crypto assets held during the reporting period. The valuation allowance as of December 31, 2023 includes allowances primarily related to California R&D credits, and realized and unrealized capital losses on crypto assets and Coinbase Ventures investments.

In accordance with the Company’s adoption of SAB 121, the Company recognized a deferred tax liability on the safeguarded asset and an offsetting deferred tax asset on the safeguarded liability. In the unlikely event of loss or theft to the safeguarded asset, the Company may be obligated to indemnify the customer for the loss, and could result in a change to the net deferred tax asset. As of December 31, 2023, the Company has not recognized any potential loss event and the SAB 121 deferred tax asset and liability are equal and offsetting.

As of December 31, 2023, the Company also had R&D credits of $260.6 million and $97.5 million for federal and state income tax purposes, respectively. If not utilized, the federal research and development credits will expire in various amounts beginning in 2042. However, the state of California research and development credits can be carried forward indefinitely. The Company also had U.S. federal net operating loss carryforwards of $105.0 million as of December 31, 2023, and an estimated $1.3 billion as of December 31, 2022. On the Company’s 2022 tax return, the Company elected to capitalize expenses which replaced the estimated 2022 net operating loss carryforwards. The U.S. federal net operating losses carry forward indefinitely. Additionally, the Company had U.S. state net operating losses of approximately $331.7 million as of December 31, 2023. Generally, California and other significant U.S. states have a twenty-year carryforward for net operating losses.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Activity related to the Company’s unrecognized tax benefits consisted of the following (in thousands):


	Year Ended December 31,
	2023		2022		2021
Balance, beginning of period	$	124,106	$	111,019	$	12,807
Settlements	—		(6,128)		—
Increase related to tax positions taken during a prior year	30,685		13,940		—
Decrease related to tax positions taken during a prior year	—		(9,187)		—
Increase related to tax positions taken during the current year	16,902		14,462		98,212
Balance, end of period	$	171,693	$	124,106	$	111,019

As of December 31, 2023 and 2022, the Company had $171.7 million and $124.1 million, respectively, of unrecognized tax benefits, of which $126.8 million and $114.4 million, respectively, would reduce income tax expense and affect the effective tax rate, if recognized. It is reasonably possible that the balance of unrecognized tax benefits could decrease within the next twelve months as a result of audit closures. The potential reduction in unrecognized tax benefits is $71.8 million, of which $67.4 million would favorably impact the Company’s effective tax rate. The Company accounts for interest and penalties related to exposures as a component of income tax expense. The Company recorded $1.6 million and $0.5 million of accrued interest and penalties, respectively, as of December 31, 2023 and $0.5 million and $0.3 million of accrued interest and penalties, respectively, as of December 31, 2022.

The Company files U.S. federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. Currently these statutes of limitations are open from 2020 forward for the United States, 2018 forward for California, 2021 forward for the United Kingdom, and 2019 forward for Ireland. The Company is currently under audit by the IRS with respect to its federal income tax returns for 2020 and 2021, and California with respect to its state income tax returns for 2018 and 2019. The Company is also under audit in the United Kingdom, Germany and India for 2021.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

21. NET INCOME (LOSS) PER SHARE

The computation of net income (loss) per share is as follows (in thousands, except per share amounts):


	Year Ended December 31,
	2023		2022		2021
Basic net income (loss) per share:
Numerator
Net income (loss)	$	94,871	$	(2,624,949)	$	3,624,120
Less: Income allocated to participating securities	(119)		—		(527,162)
Net income (loss) attributable to common stockholders, basic	$	94,752	$	(2,624,949)	$	3,096,958

Denominator
Weighted-average shares of common stock used to compute net income (loss) per share attributable to common stockholders, basic	235,796		222,314		177,319
Net income (loss) per share attributable to common stockholders, basic	$	0.40	$	(11.81)	$	17.47

Diluted net income (loss) per share:
Numerator
Net income (loss)	$	94,871	$	(2,624,949)	$	3,624,120
Less: Income allocated to participating securities	(120)		—		(439,229)
Add: Interest on convertible notes, net of tax	—		—		6,208
Less: Fair value gain on contingent consideration arrangement, net of tax	—		(6,230)		(695)
Net income (loss) attributable to common stockholders, diluted	$	94,751	$	(2,631,179)	$	3,190,404

Denominator
Weighted-average shares of common stock used to compute net income (loss) per share attributable to common stockholders, basic	235,796		222,314		177,319
Weighted-average effect of potentially dilutive securities:
Stock options	16,845		—		36,396
RSUs	1,605		—		3,773

Restricted common stock	145		—		9
Warrants	—		—		72
Convertible notes	—		—		2,388
Contingent consideration	—		24		8
Weighted-average shares of common stock used to compute net income (loss) per share attributable to common stockholders, diluted	254,391		222,338		219,965

Net income (loss) per share attributable to common stockholders, diluted	$	0.37	$	(11.83)	$	14.50

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

Certain shares of the Company’s restricted Class A common stock granted as consideration in acquisitions and the Company’s preferred stock outstanding during 2021 are participating securities. These participating securities do not contractually require the holders of such shares to participate in the Company’s losses.

The rights, including the liquidation and dividend rights, of the holders of Class A common stock and Class B common stock are identical, except with respect to voting. As a result, the undistributed earnings are allocated on a proportionate basis and the resulting income (loss) per share will, therefore, be the same for both Class A common stock and Class B common stock on an individual or combined basis.

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive (in thousands):


	December 31,
	2023	2022	2021
Stock options	6,743	31,795	6,134
RSUs	929	5,329	151
Convertible notes	3,437	3,880	—
ESPP	918	1,945	295
Restricted common stock	263	1,602	5
PRSUs	322	—	—

Total	12,612	44,551	6,585

22. COMMITMENTS AND CONTINGENCIES

Indemnifications

In the event any registrable securities are included in a registration statement, the Company’s Amended and Restated Investors’ Rights Agreement (the “IRA”) entered into with certain of the Company’s stockholders provides indemnity to each stockholder, their partners, members, officers, directors, and stockholders, legal counsel, and accountants; each underwriter, if any; and each person who controls each stockholder or underwriter, against any damages incurred in connection with investigating or defending any claim or proceeding arising as a result of such registration from which damages may result. The Company will reimburse each such party for any legal and any other expenses reasonably incurred, provided that the Company will not be liable in any such case to the extent the damages arise out of or are based upon any actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such stockholder or underwriter and stated to be specifically for use therein.

The Company also has indemnity agreements with certain officers and directors of the Company pursuant to which the Company must indemnify the officer or director against all expenses, judgments, fines, and amounts paid in settlement reasonably incurred in connection with a third party proceeding, if the indemnitee acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the Company, and in the case of a criminal proceeding, had no reasonable cause to believe the indemnitee’s conduct was unlawful.

It is not possible to determine the maximum potential exposure under these indemnification agreements: (i) because the facts and circumstances involved in each claim are unique and the Company cannot predict the number or nature of claims that may be made; (ii) due to the unique facts and circumstances involved in each particular agreement; and (iii) due to the requirement for a registration of the Company’s securities before any of the indemnification obligations contemplated in the IRA become effective.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

The Company has also provided indemnities or similar commitments on standard commercial terms in the ordinary course of business.

Legal and regulatory proceedings

The Company is subject to various litigation, regulatory investigations, and other legal proceedings that arise in the ordinary course of its business. The Company is also subject to regulatory oversight by numerous regulatory and other governmental agencies. The Company reviews its lawsuits, regulatory investigations, and other legal proceedings on an ongoing basis and provides disclosure and records loss contingencies in accordance with the loss contingencies accounting guidance. In accordance with such guidance, the Company establishes accruals for such matters when potential losses become probable and can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the possible loss in the consolidated financial statements.

In July and August 2021, three purported securities class actions were filed in the U.S. District Court for the Northern District of California against the Company, its directors, certain of its officers and employees, and certain venture capital and investment firms. The complaints alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act, in connection with the registration statement and prospectus filed in connection with the Direct Listing. In November 2021, these actions were consolidated and recaptioned as In re Coinbase Global Securities Litigation, and an amended complaint was filed. The plaintiff seeks, among other relief, unspecified compensatory damages, attorneys’ fees, and costs. The Company disputes the claims in these cases and is vigorously defending against them. Based on the preliminary nature of the proceedings in these cases, the outcome of these matters remain uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time. The Company has subsequently received, and expects to receive in the future, similar shareholder claims.

In October 2021, a purported class action captioned Underwood et al. v. Coinbase Global, Inc., was filed in the U.S. District Court for the Southern District of New York against the Company alleging claims under Sections 5, 15(a)(1) and 29(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and violations of certain California and Florida state statutes. On March 11, 2022, plaintiffs filed an amended complaint adding Coinbase, Inc. and Brian Armstrong as defendants and adding causes of action. Among other relief requested, the plaintiffs sought injunctive relief, unspecified damages, attorneys’ fees and costs. On February 1, 2023, the court dismissed all federal claims (with prejudice) and state law claims (without prejudice) against Coinbase Global, Inc., Coinbase, Inc. and Brian Armstrong. Subsequently, on February 9, 2023, the plaintiffs appealed that ruling to the U.S. Court of Appeals for the Second Circuit, and the parties completed briefing the appeal on September 13, 2023. Oral argument took place on February 1, 2024. The defendants continue to dispute the claims in this case and intend to vigorously defend against them. Based on the nature of the proceedings in this case, the outcome of this matter remains uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time.

In December 2021, a shareholder derivative suit captioned Shin v. Coinbase Global, Inc., was filed in New York state court against the Company and its directors, alleging breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets, and seeking unspecified damages and injunctive relief. The Company has subsequently received, and expects to receive in the future, similar derivative claims. The Company disputes the claims in these cases and intends to vigorously defend against them. Based on the preliminary nature of the proceedings in these cases, the outcome of these matters remain uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time.

During 2022, the Company’s subsidiary, Coinbase, Inc., which holds a BitLicense from the New York Department of Financial Services (“NYDFS”) and is therefore subject to examinations and investigations by the NYDFS, was subject to an investigation by the NYDFS relating to its compliance program including

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

compliance with the Bank Secrecy Act and sanctions laws, cybersecurity, and customer support. In January 2023, the NYDFS announced a consent order focused on historical shortcomings in Coinbase, Inc.'s compliance program. Pursuant to the consent order, Coinbase, Inc. paid a $50.0 million penalty in January 2023 and agreed to invest an additional $50.0 million in its compliance function by the end of 2024.

In April 2022, a dissenting stockholder to the Company’s acquisition of FairXchange, Inc. (“FairX”) filed a Verified Petition for Appraisal of Stock in the Court of Chancery of the State of Delaware seeking, among other relief, an appraisal of the fair value of their common and preferred shares of FairX stock. Petitioners contend that the valuation of FairX was higher than the valuation ascribed by the parties at the time of the transaction. The case is captioned Hyde Park Venture Partners Fund III, L.P. et al. v. FairXchange, LLC, et al. Trial took place in November 2023 and post-trial briefing and argument is scheduled to be completed in March 2024. A settlement offer was made and rejected in November 2023. Based on the nature of the proceedings in this case, the outcome of this matter remains uncertain and the Company cannot reasonably estimate the potential impact, if any, on its business or financial statements at this time.

In June 2023, the SEC filed a complaint in the U.S. District Court for the Southern District of New York against the Company and Coinbase, Inc. alleging that Coinbase, Inc. has acted as an unregistered securities exchange, broker, and clearing agency in violation of Sections 5, 15(a) and 17A(b) of the Exchange Act and that, through its staking program, Coinbase, Inc. has offered and sold securities without registering its offers and sales in violation of Sections 5(a) and 5(c) of the Securities Act. The SEC has also alleged that the Company is liable for the alleged violations as an alleged control person of Coinbase, Inc. The case is captioned SEC v. Coinbase, Inc. et al. The SEC seeks, among other relief, injunctive relief, disgorgement and civil money penalties. The Company and Coinbase, Inc. filed an answer to the SEC complaint in June 2023, dispute the claims in this case, and intend to vigorously defend against them. On August 4, 2023, the Company and Coinbase, Inc. filed a motion for judgment on the pleadings. The SEC filed its response on October 3, 2023 and the Company and Coinbase, Inc. filed their reply on October 24, 2023. Oral argument took place on January 17, 2024. Based on the preliminary nature of the proceedings in this case, the outcome of this matter remains uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time. An adverse resolution of the SEC’s lawsuit could have a material impact on the Company’s business and financial statements.

In June 2023, the Company and Coinbase, Inc. were issued notices, show-cause orders, and cease-and-desist letters, and became the subject of various legal actions initiated by U.S. state securities regulators in the states of Alabama, California, Illinois, Kentucky, Maryland, New Jersey, South Carolina, Vermont, Washington and Wisconsin alleging violations of state securities laws with respect to staking services provided by Coinbase, Inc. In July 2023, the Company and Coinbase, Inc. entered into agreements with state securities regulators in California, New Jersey, South Carolina and Wisconsin, pursuant to which customers in those states will no longer be able to stake new funds, in each case pending final adjudication of the matters. In October 2023, the Company and Coinbase, Inc. entered into a similar agreement with the Maryland state securities regulator. The Company and Coinbase, Inc. dispute the claims of the state securities regulators and intend to vigorously defend against them. Based on the preliminary nature of these actions, the final outcome of these matters remains uncertain and the Company cannot estimate the potential impact on its business or financial statements at this time. An adverse resolution could have a material impact on the Company’s business and financial statements.

The Company has, from time to time, received investigative subpoenas and requests from regulators for documents and information about certain customer programs, operations, and existing and intended future products, including the Company’s processes for listing assets, the classification of certain listed assets, its staking programs, and its stablecoin and yield-generating products.

Except as otherwise disclosed, the Company believes the ultimate resolution of existing legal and regulatory investigation matters will not have a material adverse effect on the financial condition, results of

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

operations, or cash flows of the Company. However, in light of the uncertainties inherent in these matters, it is possible that the ultimate resolution of one or more of these matters may have a material adverse effect on the Company’s results of operations for a particular period, and future changes in circumstances or additional information could result in additional accruals or resolution in excess of established accruals, which could adversely affect the Company’s results of operations, potentially materially.

Tax regulation

Current promulgated tax rules related to crypto assets are unclear and require significant judgments to be made in interpretation of the law, including but not limited to the areas of income tax, information reporting, transaction level taxes and the withholding of tax at source. Additional legislation or guidance may be issued by U.S. and non-U.S. governing bodies that may differ significantly from the Company's practices or interpretation of the law, which could have unforeseen effects on the Company’s financial condition and results of operations, and accordingly, the related impact on the Company’s financial condition and results of operations is not estimable.

23. RELATED PARTY TRANSACTIONS

Revenue and accounts receivable

Certain of the Company’s directors, executive officers, and principal owners, including immediate family members, are users of the Company’s platform. The Company recognized revenue from related party customers of $17.9 million, $12.9 million and $29.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, amounts receivable from related party customers were $3.4 million and $1.3 million, respectively.

Customer assets and liabilities

As of December 31, 2023 and 2022, safeguarding customer crypto assets and safeguarding customer crypto liabilities for related parties were $8.8 billion and $3.5 billion, respectively. As of December 31, 2023 and 2022, customer custodial funds and customer custodial cash liabilities due to related party customers were $348.0 million and $14.2 million, respectively.

Prepaid and other assets

During the years ended December 31, 2023 and 2022, the Company invested an aggregate of $4.0 million and $13.8 million, respectively, in investees in which certain related parties of the Company held an interest over 10%.

Expenses

During the year ended December 31, 2023, the Company incurred $2.5 million for professional and consulting services provided by entities affiliated with related parties. There were no professional and consulting services provided by entities affiliated with related parties to note during the years ended December 31, 2022 and 2021.

Coinbase Global, Inc.

Notes to Consolidated Financial Statements

24. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Changes in operating assets and liabilities affecting cash were as follows (in thousands):


	Year Ended December 31,
	2023		2022		2021
USDC	$	254,571	$	(848,138)	$	(77,471)
Accounts and loans receivable	80,375		(141,023)		28,511
Deposits in transit	(115,391)		28,952		(36,527)
Income taxes, net	8,547		1,906		(62,145)
Other current and non-current assets	28,033		19,237		(20,060)
Accounts payable	954		18,612		27,330
Lease liabilities	(39,733)		(10,223)		(20,596)
Other current and non-current liabilities	108,850		(100,771)		302,396
Net changes in operating assets and liabilities	$	326,206	$	(1,031,448)	$	141,438

Reconciliation of cash, cash equivalents, and restricted cash (in thousands):


	Year Ended December 31,
	2023		2022		2021
Cash and cash equivalents	$	5,139,351	$	4,425,021	$	7,123,478
Restricted cash	22,992		25,873		30,951
Customer custodial cash	4,393,086		4,978,752		10,526,233
Total cash, cash equivalents, and restricted cash	$	9,555,429	$	9,429,646	$	17,680,662

Supplemental schedule of non-cash investing and financing activities were as follows (in thousands):


	Year Ended December 31,
	2023		2022		2021
Crypto assets borrowed	$	450,663	$	920,379	$	1,134,876
Crypto assets borrowed repaid with crypto assets	559,191		1,432,688		609,600
Crypto loans originated	396,981		—		—
Crypto loans repaid	469,763		—		—
Non-cash assets received as collateral	255,383		26,874		—
Non-cash assets received as collateral returned	282,257		—		—
Non-cash assets pledged as collateral	156,963		58,377		—
Non-cash assets pledged as collateral returned	163,460		—		—
Non-cash consideration paid for business combinations	51,494		324,925		571,196
Purchase of crypto assets and investments with non-cash consideration	27,977		19,967		13,511
Realized gain on crypto assets held as investments	48,491		—		—
Disposal of crypto assets and investments for non-cash consideration	42,551		617		—
Changes in right-of-use assets and operating lease obligations	17,530		3,059		27,286

Previous: Item 7A. Quantitative and Qualitative Disclosures about Market Risk · Next: Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.