Item 1. Financial Statements

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Item 1. Financial Statements

Coinbase Global, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value data)

(unaudited)


	June 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	5,682,068	$	7,123,478
Restricted cash	28,962		30,951
Customer custodial cash	7,181,148		10,526,233
Customer crypto assets(1)	88,453,873		—
USDC	361,714		100,096
Accounts and loans receivable, net of allowance	245,616		396,025
Income tax receivable	62,406		61,231
Prepaid expenses and other current assets	146,463		135,849
Total current assets	102,162,250		18,373,863
Non-current assets:
Crypto assets held	539,683		988,193
Lease right-of-use assets	85,972		98,385
Property and equipment, net	142,209		59,230
Goodwill	1,073,906		625,758
Intangible assets, net	189,508		176,689
Other non-current assets	1,274,715		952,307

Total assets	$	105,468,243	$	21,274,425

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Customer custodial cash liabilities	$	7,071,557	$	10,480,612
Customer crypto liabilities(2)	88,453,873		—
Accounts payable	40,745		39,833
Accrued expenses and other current liabilities	457,399		439,559
Crypto asset borrowings	136,548		426,665
Lease liabilities, current	34,174		32,366

Total current liabilities	96,194,296		11,419,035

Lease liabilities, non-current	59,317		74,078


Long-term debt	3,389,033		3,384,795
Other non-current liabilities	12,208		14,828
Total liabilities	99,654,854		14,892,736

Commitments and contingencies (Note 18)


Stockholders’ equity:
Class A common stock, $0.00001 par value; 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; 176,087 and 168,807 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	2		2
Class B common stock, $0.00001 par value; 500,000 shares authorized at June 30, 2022 and December 31, 2021; 48,311 and 48,310 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	—		—

Additional paid-in capital	3,004,459		2,034,658
Accumulated other comprehensive loss	(18,183)		(3,395)
Retained earnings	2,827,111		4,350,424
Total stockholders’ equity	5,813,389		6,381,689
Total liabilities, convertible preferred stock and stockholders’ equity	$	105,468,243	$	21,274,425

(1)Safeguarding assets

(2)Safeguarding liabilities

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021








Revenue:
Net revenue	$	802,603	$	2,033,011	1,967,494		3,629,991
Other revenue	5,722		194,951		7,267		399,082
Total revenue	808,325		2,227,962		1,974,761		4,029,073
Operating expenses:
Transaction expense	167,187		335,426		445,013		569,492
Technology and development	609,249		291,461		1,179,913		475,686
Sales and marketing	140,894		195,733		341,098		313,722
General and administrative	470,169		248,195		883,747		369,426
Restructuring	42,453		—		42,453		—
Other operating expense, net	422,762		282,422		681,389		438,309


Total operating expenses	1,852,714		1,353,237		3,573,613		2,166,635
Operating (loss) income	(1,044,389)		874,725		(1,598,852)		1,862,438
Interest expense	23,656		748		45,794		748
Other expense (income), net	172,524		5,096		205,368		(3,857)

(Loss) income before income taxes	(1,240,569)		868,881		(1,850,014)		1,865,547

Benefit from income taxes	(146,915)		(737,468)		(326,701)		(512,265)

Net (loss) income	$	(1,093,654)	$	1,606,349	$	(1,523,313)	$	2,377,812

Net (loss) income attributable to common stockholders:
Basic	$	(1,093,654)	$	1,589,713	$	(1,523,313)	$	1,677,909
Diluted	$	(1,099,838)	$	1,593,150	$	(1,529,497)	$	1,804,860

Net (loss) income per share attributable to common stockholders:
Basic	$	(4.95)	$	7.77	$	(6.95)	$	11.78
Diluted	$	(4.98)	$	6.42	$	(6.97)	$	9.60

Weighted-average shares of common stock used to compute net (loss) income per share attributable to common stockholders:
Basic	220,988		204,728		219,240		142,397
Diluted	221,034		248,147		219,286		187,918

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income

(In thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net (loss) income	$	(1,093,654)	$	1,606,349	(1,523,313)		2,377,812

Other comprehensive (loss) income:
Translation adjustment, net of tax	(14,293)		656		(14,788)		(3,482)

Comprehensive (loss) income	$	(1,107,947)	$	1,607,005	$	(1,538,101)	$	2,374,330

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity

(In thousands)

(unaudited)


	Three Months Ended June 30,
	Convertible Preferred Stock						Additional Paid-In Capital		Accumulated Other Comprehensive (Loss) Income		Retained Earnings
		Common Stock
	Shares	Amount		Shares	Amount				Total
Balance at April 1, 2022	—	$	—	221,325	$	2	$	2,579,216	$	(3,890)	$	3,920,765	$	6,496,093
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		1,115	—		16,446		—		—		16,446
Stock-based compensation expense	—	—		—	—		461,556		—		—		461,556



Issuance of common stock upon settlement of Restricted Stock Units ("RSUs") and restricted common stock, net of shares withheld	—	—		1,803	—		(71,301)		—		—		(71,301)

Issuance of common stock under the Employee Stock Purchase Plan	—	—		155	—		14,863		—		—		14,863
Other	—	—		—	—		3,679		—		—		3,679
Comprehensive loss	—	—		—	—		—		(14,293)		—		(14,293)
Net loss	—	—		—	—		—		—		(1,093,654)		(1,093,654)
Balance at June 30, 2022	—	$	—	224,398	$	2	$	3,004,459	$	(18,183)	$	2,827,111	$	5,813,389

Balance at April 1, 2021	112,407	$	552,037	85,666	$	—	$	804,523	$	2,118	$	1,497,767	$	2,304,408
Issuance of common stock upon exercise of stock options	—	—		11,383	—		98,223		—		—		98,223
Stock-based compensation expense	—	—		—	—		189,335		—		—		189,335
Issuance of equity instruments as consideration for business combination	—	—		96	—		14,218		—		—		14,218
Conversion of preferred stock	(112,407)	(552,037)		112,407	2		552,035		—		—		552,037

Issuance of common stock upon settlement of RSUs, net of shares withheld	—	—		324	—		(51,670)		—		—		(51,670)
Purchase of capped calls	—	—		—	—		(90,131)		—		—		(90,131)
Comprehensive Income	—	—		—	—		—		656		—		656
Net income	—	—		—	—		—		—		1,606,349		1,606,349
Balance at June 30, 2021	—	$	—	209,876	$	2	$	1,516,533	$	2,774	$	3,104,116	$	4,623,425

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity

(In thousands)

(unaudited)


	Six Months Ended June 30,
	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, 2022	—	$	—	217,117	$	2	$	2,034,658	$	(3,395)	$	4,350,424	$	6,381,689
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		2,240	—		34,942		—		—		34,942
Stock-based compensation expense	—	—		—	—		815,094		—		—		815,094
Issuance of equity instruments as consideration for business combinations	—	—		1,663	—		314,356		—		—		314,356


Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld	—	—		3,223	—		(213,133)		—		—		(213,133)

Issuance of common stock under the Employee Stock Purchase Plan	—	—		155	—		14,863		—		—		14,863
Other	—	—		—	—		3,679		—		—		3,679
Comprehensive loss	—	—		—	—		—		(14,788)		—		(14,788)
Net loss	—	—		—	—		—		—		(1,523,313)		(1,523,313)
Balance at June 30, 2022	—	$	—	224,398	$	2	$	3,004,459	$	(18,183)	$	2,827,111	$	5,813,389

Balance at January 1, 2021	112,878	$	562,467	73,108	$	—	$	231,024	$	6,256	$	726,304	$	963,584
Issuance of common stock upon exercise of stock options, net of repurchases	—	—		19,293	—		137,804		—		—		137,804
Stock-based compensation expense	—	—		—	—		294,711		—		—		294,711
Issuance of equity instruments as consideration for business combinations	—	—		3,680	—		431,897		—		—		431,897
Conversion of preferred stock	(112,878)	(562,467)		112,878	2		562,465		—		—		562,467
Issuance of shares from exercise of warrants	—	—		412	—		433		—		—		433
Issuance of common stock upon settlement of RSUs, net of shares withheld	—	—		505	—		(51,670)		—		—		(51,670)
Purchase of capped calls	—	—		—	—		(90,131)		—		—		(90,131)
Comprehensive loss	—	—		—	—		—		(3,482)		—		(3,482)
Net income	—	—		—	—		—		—		2,377,812		2,377,812
Balance at June 30, 2021	—	$	—	209,876	$	2	$	1,516,533	$	2,774	$	3,104,116	$	4,623,425

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities
Net (loss) income	$	(1,523,313)	$	2,377,812
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities
Depreciation and amortization	73,607		23,534
Crypto asset impairment expense	663,159		175,636
Investment impairment expense	69,289		—
Other impairment expense	7,949		—
Stock-based compensation expense	743,637		293,963
Provision for transaction losses and doubtful accounts	(9,016)		9,797
Loss on disposal of property and equipment	—		11
Deferred income taxes	(337,520)		(93,328)
Unrealized loss on foreign exchange	115,072		2,392
Non-cash lease expense	14,451		19,338
Change in fair value of contingent consideration	(8,223)		—
Realized gain on crypto assets	(19,121)		(95,454)
Crypto assets received as revenue	(290,209)		(418,871)
Crypto asset payments for expenses	265,816		364,772
Fair value loss (gain) on derivatives	952		(25,215)
Amortization of debt discount and issuance costs	4,838		748
Loss (gain) on investments	1,830		(10,271)
Changes in operating assets and liabilities:
USDC	(287,984)		(118,156)
Accounts and loans receivable	43,692		83,754

Income taxes, net	4,058		(437,287)

Other current and non-current assets	(663)		(126,772)
Customer custodial cash liabilities	(3,421,287)		5,101,293
Accounts payable	659		23,952
Lease liabilities	(4,033)		(18,350)
Other current and non-current liabilities	28,585		261,366
Net cash (used in) provided by operating activities	(3,863,775)		7,394,664
Cash flows from investing activities
Purchase of property and equipment	(3,741)		(235)
Proceeds from sale of property and equipment	—		31
Capitalized internal-use software development costs	(32,088)		(9,787)
Business combinations, net of cash acquired	(186,150)		(32,992)
Purchase of investments	(46,902)		(38,631)
Purchase of assembled workforce	—		(24,000)

Proceeds from settlement of investments	1,497		—
Purchase of crypto assets held	(1,204,918)		(1,100,865)
Disposal of crypto assets held	761,226		937,472
Loans originated	(166,648)		(107,596)
Proceeds from repayment of loans	259,104		38,855
Net cash used in investing activities	(618,620)		(337,748)

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Six Months Ended June 30,
	2022		2021
Cash flows from financing activities

Issuance of common stock upon exercise of stock options, net of repurchases	31,866		149,865
Taxes paid related to net share settlement of equity awards	(213,133)		(51,670)
Proceeds received under the Employee Stock Purchase Plan	12,031		—
Other financing activities	3,679		—


Issuance of shares from exercise of warrants	—		433
Issuance of convertible senior notes, net	—		1,406,179

Purchase of capped calls	—		(90,131)
Proceeds from short-term borrowings	149,400		20,000
Repayment of short-term borrowings	(170,000)		—
Net cash (used in) provided by financing activities	(186,157)		1,434,676

Net (decrease) increase in cash, cash equivalents, and restricted cash	(4,668,552)		8,491,592

Effect of exchange rates on cash, cash equivalents, and restricted cash	(119,932)		11,015

Cash, cash equivalents, and restricted cash, beginning of period	17,680,662		4,856,029

Cash, cash equivalents, and restricted cash, end of period	$	12,892,178	$	13,358,636

Cash, cash equivalents, and restricted cash consisted of the following:
Cash and cash equivalents	$	5,682,068	$	4,365,982
Restricted cash	28,962		30,842
Customer custodial cash	7,181,148		8,961,812
Total cash, cash equivalents, and restricted cash	$	12,892,178	$	13,358,636

Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	43,630	$	—
Cash paid during the period for income taxes	10,002		51,504
Operating cash outflows for amounts included in the measurement of operating lease liabilities	7,020		13,413

Supplemental schedule of non-cash investing and financing activities
Unsettled purchases of property and equipment	$	283	$	533
Right-of-use assets obtained in exchange for operating lease obligations	3,240		18,460
Non-cash consideration paid for business combinations	324,925		442,760
Purchase of crypto assets and investments with non-cash consideration	17,096		2,090

Crypto assets borrowed	505,176		290,449
Crypto assets borrowed repaid with crypto assets	935,792		59,348

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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”).

The Company operates globally and is a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy. The Company offers retail users the primary financial account for the cryptoeconomy, institutions a state of the art marketplace with a deep pool of liquidity for transacting in crypto assets, and ecosystem partners technology and services that enable them to build crypto-based applications and securely accept crypto assets as payment.

The Company is a remote-first company. Accordingly, the Company does not maintain a headquarters.

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”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

The accompanying condensed consolidated financial statements of the Company are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), on the same basis as the audited consolidated financial statements, and in management’s opinion, reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of the Company’s condensed consolidated financial statements for the periods presented. The unaudited condensed consolidated results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year or any other period.

These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2022 (the “Annual Report”).

These condensed consolidated financial statements 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 unaudited condensed consolidated financial statements, the basis of presentation of such subsidiaries is converted to GAAP. All intercompany accounts and transactions have been eliminated in consolidation.

There were no changes to the significant accounting policies or recent accounting pronouncements that were disclosed in Note 2. Summary of Significant Accounting Policies to the audited consolidated financial statements included in the Annual Report, other than as discussed below.

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 net income.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Use of estimates

The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions in the Company’s condensed 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 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 Company’s incremental borrowing rate; the fair value of Customer crypto assets and liabilities; the fair value of assets acquired and liabilities assumed in business combinations, including contingent consideration arrangements; the fair value of derivatives and related hedges; the fair value of long-term debt; assessing the likelihood of adverse outcomes from claims and disputes; and loss provisions.

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 Company’s condensed 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.

Customer custodial cash and Customer custodial cash liabilities

Customer custodial cash represents restricted cash and cash equivalents maintained in segregated Company bank accounts that are held for the exclusive benefit of customers. Customer custodial cash liabilities represent cash deposits held by customers in their fiat wallets and unsettled deposits and withdrawals. The Company restricts the use of the assets underlying the Customer custodial cash to meet regulatory requirements and classifies the assets as current based on their purpose and availability to fulfill its 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 cash, and In-transit funds receivable. As of June 30, 2022 and December 31, 2021, the Company’s eligible liquid assets were greater than the aggregate amount of Customer custodial cash liabilities.

Concentration of credit risk

The Company’s Cash and cash equivalents, Restricted cash, Customer custodial cash, and Accounts and loans receivable are potentially subject to concentration of credit risk. Cash and cash equivalents, Restricted cash, and Customer custodial cash are placed with financial institutions which are of high credit quality. The Company invests Cash and cash equivalents, and Customer custodial accounts primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company also holds cash at crypto trading venues and performs a regular assessment of these crypto trading venues as part of its risk management process.

The Company held $361.7 million and $100.1 million of USD Coin (“USDC”) as of June 30, 2022 and December 31, 2021, respectively. In July 2022, the issuer of USDC stated that, as of June 30, 2022, underlying reserves were held in cash and 3-month U.S. Treasuries within segregated accounts for the benefit of USDC holders.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2022 and December 31, 2021, the Company had no customers who accounted for more than 10% of the Company’s Accounts and loans receivable, net. As of June 30, 2022 and December 31, 2021, the Company had no payment processors or bank partners representing more than 10% of Accounts and loans receivable, net.

During the three and six months ended June 30, 2022 and June 30, 2021, no customer accounted for more than 10% of total revenue.

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 in the condensed consolidated balance sheets at fair value, with changes in fair value recognized in Other operating expense, net.

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 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. For qualifying fair value hedges, the changes in the fair value of the derivative and the fair value of the hedged item, the crypto assets, are recognized in current-period earnings in Other operating expense, net in the condensed consolidated statements of operations. Derivative amounts affecting earnings are recognized in the same line item as the earnings effect of the hedged item.

Customer crypto assets and liabilities

Customer crypto assets and liabilities represent the Company’s obligation to safeguard customers’ crypto assets in digital wallets on the Company’s platform. The Company safeguards these assets for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes Customer crypto liabilities and corresponding Customer crypto assets, on initial recognition and at each reporting date, at fair value of the crypto assets. Any loss, theft, or other misuse would impact the measurement of Customer crypto assets.

Recent accounting pronouncements

Recently adopted accounting pronouncements

On October 28, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 amends Accounting Standards Codification 805 (“ASC 805”) to require acquiring entities to apply Topic 606 - Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities in a business combination. The Company early adopted the standard on January 1, 2022. The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

On March 31, 2022, the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard crypto assets that an entity holds for its customers. Safeguarding is defined as taking actions to secure customer crypto assets and the associated cryptographic key information and protecting them from loss, theft, or other misuse. The guidance requires an entity to recognize a liability for the obligation to safeguard the users’ assets, and recognize an associated asset for the crypto assets safeguarded. Both the liability and asset should be measured initially and subsequently at the fair value of the crypto assets being safeguarded. The guidance also requires additional disclosures related to the nature and amount of crypto assets that the entity is responsible for holding for its customers, with separate disclosure for each significant crypto asset, and the vulnerabilities the entity has due to any concentration in such activities. The Company has adopted this guidance as of June 30, 2022 with retrospective application as of January 1, 2022. The balances as of January 1, 2022 for the Customer crypto assets and Customer crypto liabilities were both $267.6 billion.

Accounting pronouncements pending adoption

On June 30, 2022, FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. The standard requires specific disclosures related to equity securities that are subject to contractual sale restrictions, including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. The new standard is effective for the Company for its fiscal year beginning January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

3. RESTRUCTURING

In June 2022, the Company announced and completed a restructuring impacting approximately 18% of the Company’s headcount, effective immediately. 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 post-employment benefits. The Company does not expect to incur any additional charges and the cash payments associated with this restructuring are expected to be substantially completed by the third quarter of 2022.

The following expenses were recognized within Restructuring expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2022 (in thousands), and the associated liability remains outstanding as of June 30, 2022 and is recorded in Accrued expenses and other current liabilities in the condensed consolidated balance sheets:



Separation pay	$	39,259
Post-employment benefits	3,194

Total	$	42,453

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

4. ACQUISITIONS

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 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. 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. During the three and six months ended June 30, 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 are subject to an indemnity holdback. These cash amounts and shares will be released 18 months after the closing date of the transaction.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the condensed 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):


Cash and cash equivalents	$	10,560
Restricted cash	573
Accounts and loans receivable, net of allowance	4,981
Prepaid expenses and other current assets	4,182
Lease right-of-use assets	1,059
Property and equipment, net	1,248
Goodwill	222,732
Intangible assets	28,500
Other non-current assets	3,476
Total assets	277,311

Accounts payable	719
Accrued expenses and other current liabilities	11,325
Lease liabilities	1,059
Other non-current liabilities	6,224
Total liabilities	19,327
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
In-process research and development ("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 condensed consolidated statements of operations.

The impact of this acquisition was not considered significant to the Company’s condensed consolidated financial statements for the current period presented and pro forma financial information has not been provided.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 retail and institutional customers in the United States.

In accordance with ASC 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. 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. During the three and six months ended June 30, 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.

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. These cash amounts and shares will be released 15 months after the closing date of the transaction.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)


Cash and cash equivalents	$	10,867
Accounts and loans receivable, net of allowance	411
Prepaid expenses and other current assets	20
Intangible assets	41,000
Goodwill	231,685
Other non-current assets	8,295
Total assets	292,278

Accounts payable	472
Accrued expenses and other current liabilities	5,796
Other non-current liabilities	10,920
Total liabilities	17,188
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 condensed consolidated statements of operations.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 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 condensed consolidated statement 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):


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. These shares will be released 18 months after the closing date of the transaction.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The results of operations and the fair values of the assets acquired and liabilities assumed have been included in the condensed 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):


Cash and cash equivalents	$	12,201
Crypto assets held	5,177
Accounts and loans receivable, net of allowance	2,323
Prepaid expenses and other current assets	122

Intangible assets	39,100
Goodwill	404,167
Other non-current assets	1,221
Lease right-of-use assets	808
Total assets	465,119

Accounts payable	526
Accrued expenses and other current liabilities	1,920
Lease liabilities	808
Other non-current liabilities	4,597
Total liabilities	7,851
Net assets acquired	$	457,268

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 condensed consolidated statements of operations.

The impact of this acquisition was not considered significant to the Company’s condensed consolidated financial statements and pro forma financial information has not been provided.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

5. REVENUE

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. The Company primarily generates revenue through transaction fees charged on the platform.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net revenue
Transaction revenue









Retail, net	$	616,212	$	1,827,951	$	1,582,054	$	3,283,121
Institutional, net	39,001		102,431		86,196		187,840
Total transaction revenue	655,213		1,930,382		1,668,250		3,470,961

Subscription and services revenue
Blockchain rewards	68,410		34,421		150,305		43,673
Custodial fee revenue	22,178		31,698		53,872		55,148
Earn campaign revenue	2,495		16,947		8,400		28,058
Interest income	32,514		6,481		42,968		9,801

Other subscription and services revenue	21,793		13,082		43,699		22,350
Total subscription and services revenue	147,390		102,629		299,244		159,030
Total net revenue	802,603		2,033,011		1,967,494		3,629,991

Other revenue

Crypto asset sales revenue	48		194,524		617		398,323
Corporate interest and other income	5,674		427		6,650		759


Total other revenue	5,722		194,951		7,267		399,082

Total revenue	$	808,325	$	2,227,962	$	1,974,761	$	4,029,073

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Transaction revenue

Retail 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 on the institutional platform. Institutional clients can trade via the Company’s trading platform or utilize Coinbase Prime services depending on their needs. High-frequency trading firms, such as market makers and principal traders, benefit from lower latency by connecting through the trading platform, while corporations and family offices can access an integrated suite of investment services through Coinbase Prime.

The Company’s service is comprised of a single performance obligation to provide a crypto asset matching service when customers buy, sell, or convert crypto assets on the platform. 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 on the platform 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 trading 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Blockchain rewards

The Company generates revenues in crypto assets through various blockchain protocols. These blockchain protocols, or the participants that form the protocol networks, reward users for performing various activities on the blockchain, such as participating in proof-of-stake networks and 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. Blockchain rewards are primarily comprised of 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. In exchange for participating in the consensus mechanism of these networks, the Company earns rewards 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. Blockchain services offered as part of Coinbase Cloud’s blockchain infrastructure solutions are included in Other subscription and services 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 being due within thirty days of receipt of the invoice. Accounts receivable from customers for Custodial fee revenue, net of allowance, were $11.0 million and $22.4 million as of June 30, 2022 and December 31, 2021, respectively. The allowance recognized against these fees was not material for any of the periods presented.

Earn campaign revenue

The Company provides a platform for crypto asset issuers, the customer, to engage with the Company’s retail users and teach them about new crypto assets through the use of educational tools, videos, and tutorials. In exchange for completing a task, such as watching the video or downloading an application, retail users may be eligible to receive crypto assets from the crypto asset issuer. The Company is the agent with respect to the delivery of the crypto assets. The Company earns a commission from the crypto asset issuer based on the amount of crypto assets that are distributed to users.

Interest income and corporate interest and other income

The Company holds Customer custodial cash and Cash and cash equivalents at certain third-party banks which earn interest. The Company also earns interest income under a revenue sharing arrangement and on loans granted to retail and institutional users. Interest income 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 cash, revenue sharing, and loans is included in Interest income within Subscription and services revenue. Interest earned on Cash and cash equivalents is included in Corporate interest and other income, within Other revenue.

Other subscription and services revenue

Other subscription and services revenue primarily includes revenue from Coinbase Cloud, which includes staking application, delegation, and infrastructure services, Coinbase One, and 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Other revenue

Other revenue includes the sale of crypto assets and Corporate interest and other income. Periodically, as an accommodation to customers, the Company may fulfill customer transactions using the Company’s own crypto assets held for operating purposes. The Company has custody and control of the crypto assets prior to the sale to the customer and records revenue at the point in time when the sale to the customer is processed. Accordingly, the Company records the total value of the sale in Other revenue and the cost of the crypto assets in Other operating expense, net within the condensed consolidated statements of operations. The cost of crypto assets used in fulfilling customer transactions was $0 and $178.8 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $0.3 million and $365.2 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Related party transactions

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 with related parties of $2.6 million and $8.0 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $7.6 million and $13.3 million for the six months ended June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022 and December 31, 2021, amounts receivable from related parties were $1.3 million and $4.5 million, respectively. As of June 30, 2022, Customer custodial cash liabilities due to related party customers were $2.0 million. As of December 31, 2021, Customer custodial cash liabilities due to related party customers were immaterial.

Revenue by geographic location

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
United States	$	667,214	$	1,870,465	$	1,623,047	$	3,335,900

Rest of the World(1)	141,111		357,497		351,714		693,173
Total revenue	$	808,325	$	2,227,962	$	1,974,761	$	4,029,073

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

6. ACCOUNTS AND LOANS RECEIVABLE, NET OF ALLOWANCE

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


	June 30,		December 31,
	2022		2021
In-transit customer receivables	$	60,724	$	102,720
Trade finance receivables	144		1,865
Custodial fee revenue receivable	12,755		23,727
Loans receivable(1)	126,004		218,461
Interest and other receivables(2)	61,524		73,803
Allowance for doubtful accounts(3)	(15,535)		(24,551)
Total accounts and loans receivable, net of allowance	$	245,616	$	396,025

(1)The fair value of collateral held as security exceeded the outstanding loans receivable as of June 30, 2022 and December 31, 2021, so no allowance was recorded.

(2)Includes Accounts receivables denominated in crypto assets of $6.7 million and $26.4 million as of June 30, 2022 and December 31, 2021, respectively. See Note 12. Derivatives for additional details.

(3)Includes provision for transaction losses of $4.3 million and $16.8 million as of June 30, 2022 and December 31, 2021, respectively.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Loans receivable

The Company grants loans to retail users and institutions. As of June 30, 2022 and December 31, 2021, the Company had granted loans with an outstanding balance of $126.0 million and $218.5 million, respectively. The related interest receivable on the loans as of June 30, 2022 and December 31, 2021, was $1.0 million and $1.3 million, respectively.

The amounts loaned are collateralized with the crypto assets held by the borrower in their crypto asset wallet on the Company’s platform. The Company does not have the right to use such collateral unless the borrower defaults on the loans. The Company’s credit exposure is significantly limited and no allowance was recorded against these loans receivable. Loans receivable are measured at amortized cost. The carrying value of the loans approximates their fair value. As of June 30, 2022 and December 31, 2021, there were no loans receivable past due.

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

Goodwill

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


	Six Months Ended June 30, 2022		Year Ended December 31, 2021


Balance, beginning of period	$	625,758	$	77,212
Additions due to business combinations	454,418		548,546
Measurement period adjustments(1)	(6,270)		—
Balance, end of period	$	1,073,906	$	625,758

(1) The measurement period adjustments consisted of $4.1 million, $0.3 million and $1.9 million related to the Unbound acquisition, 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 was no impairment recognized against goodwill at the beginning or end of the periods presented.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Intangible assets, net

Intangible assets, net consisted of the following (in thousands, except years data):


As of June 30, 2022	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Weighted Average Remaining Useful Life (in years)
Amortizing intangible assets
Acquired developed technology	$	128,292	$	(57,805)	$	70,487	2.47
User base	2,997		(1,585)		1,412		1.25
Customer relationships	86,691		(36,621)		50,070		3.03

Non-compete agreement	2,402		(1,401)		1,001		2.09
Assembled workforce	60,800		(26,541)		34,259		0.94
Trade Relationships	3,400		(472)		2,928		2.59
In-process research and development(1)	2,201		—		2,201		N/A
Indefinite-lived intangible assets
Domain name	250		—		250		N/A
Licenses	26,900		—		26,900		N/A
Total	$	313,933	$	(124,425)	$	189,508

(1)Amortization begins once the technology is placed in service. IPR&D is expected to have a useful life of three years.


As of December 31, 2021	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Weighted Average Remaining Useful Life (in years)
Amortizing intangible assets
Acquired developed technology	$	100,908	$	(34,865)	$	66,043	1.97
User base	2,997		(1,020)		1,977		1.75
Customer relationships	79,491		(27,789)		51,702		3.68

Non-compete agreement	2,402		(1,161)		1,241		2.58
Assembled workforce	60,800		(8,324)		52,476		1.43
In-process research and development(1)	3,000		—		3,000		N/A

Indefinite-lived intangible assets
Domain name	250		—		250		N/A

Total	$	249,848	$	(73,159)	$	176,689

(1)Amortization begins once the technology is placed in service. IPR&D is expected to have a useful life of three years.

Amortization expense of intangible assets was $26.4 million and $52.3 million for the three and six months ended June 30, 2022, respectively. Amortization expense of intangible assets was $8.3 million and $15.2 million for the three and six months ended June 30, 2021, respectively. The Company estimates that there is no significant residual value related to its amortizing intangible assets.

During the three and six months ended June 30, 2022, the Company recorded impairment charges of $3.2 million and $4.4 million, respectively, related to its intangible assets, excluding Crypto assets held. The Company did not have any impairment charges in the three and six months ended June 30, 2021. Impairment expense is included in Other operating expense, net in the condensed consolidated statements of operations.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The expected future amortization expense for intangible assets other than IPR&D as of June 30, 2022 is as follows (in thousands):


2022 (for the remainder of)	$	51,813
2023	68,869
2024	21,360
2025	13,119
2026	4,818
Thereafter	178
Total expected future amortization expense	$	160,157

Crypto assets held

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


	June 30,		December 31,
	2022		2021
Recorded at impaired cost
Crypto assets held as investments	$	289,744	$	209,415
Crypto assets held for operating purposes	113,653		357,093
Total Crypto assets held recorded at impaired cost	403,397		566,508
Recorded at fair value(1)
Crypto assets held as investments	1,896		—
Crypto assets borrowed	134,390		421,685
Total Crypto assets held recorded at fair value	136,286		421,685
Total Crypto assets held	$	539,683	$	988,193

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

Crypto assets held as of June 30, 2022 and December 31, 2021 includes $0.1 million and $38.1 million, respectively, of crypto assets loaned to customers under the trade finance receivables settlement arrangements as these did not meet the criteria for derecognition.

The Company recorded gross impairment charges of $435.2 million and $663.2 million during the three and six months ended June 30, 2022, respectively, due to the observed market price of crypto assets decreasing below the carrying value during the period. The Company recorded gross impairment charges of $174.8 million and $175.6 million during the three and six months ended June 30, 2021, respectively, due to the observed market price of crypto assets decreasing below the carrying value during the period. The Company partially recovered impairments recorded during the period through subsequent crypto asset sales and disposals. Of the gross impairment charges, $377.0 million and $586.8 million were recorded during the three and six months ended June 30, 2022, respectively, which relate to the crypto assets still held as of June 30, 2022. Impairment expense is included in Other operating expense, net in the condensed consolidated statements of operations.

See Note 12. Derivatives, for additional details regarding Crypto assets held designated as hedged items in fair value hedges. See Note 13. Fair Value Measurements, for additional details regarding the carrying value of the Company’s Crypto assets held.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

8. CUSTOMER ASSETS AND LIABILITIES

The Company includes customer custodial funds in the condensed consolidated balance sheets as Customer custodial cash and includes customer safeguarding assets in the condensed consolidated balance sheets as Customer crypto assets, with a corresponding offset in Customer crypto liabilities. Custodial funds due to customers are included in the condensed consolidated balance sheets as Customer custodial cash liabilities.

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


	June 30,		December 31,
	2022		2021
Customer custodial cash	$	7,181,148	$	10,526,233
Customer crypto assets	88,453,873		—
Total customer assets	$	95,635,021	$	10,526,233

Customer custodial cash liabilities	$	7,071,557	$	10,480,612
Customer crypto liabilities	88,453,873		—
Total customer liabilities	$	95,525,430	$	10,480,612

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 Customer crypto assets as well as corresponding Customer crypto liabilities, in accordance with recently adopted guidance, SAB 121. The Company maintains a record of all assets in digital wallets held on our 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 that are not maintained on our platform and for which the Company does not maintain a private key or the ability to recover a customer’s private key, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121. The Company records the 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 has committed to securely store all crypto assets and cryptographic keys (or portions thereof) it holds on behalf of customers, and the value of these assets have been recorded as Customer crypto liabilities and corresponding 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 at all times and strategically storing custodied assets offline using Coinbase’s cold storage process. The Company also does not reuse or rehypothecate customer crypto assets nor grant security interests in customer crypto assets, in each case unless required by law or expressly agreed to by the customer. Any loss or theft would impact the measurement of the Customer crypto assets. During the six months ended June 30, 2022, no losses have been incurred in connection with Customer crypto assets.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following table sets forth the fair value of Customer crypto assets, as shown in the condensed consolidated balance sheets, as Customer crypto assets and Customer crypto liabilities, as of June 30, 2022 (in billions):


	Fair Value		Percentage of total(1)
Bitcoin	$	41.7	47.2	%
Ethereum	18.8		21.2	%

Other crypto assets	28.0		31.6	%
Total customer crypto assets	$	88.5	100.0	%

(1)As of June 30, 2022, no assets other than Bitcoin and Ethereum individually represented more than 5% of total Customer crypto assets.

See Note 13. Fair Value Measurements, for additional details regarding the Customer crypto assets and Customer crypto liabilities.

9. PREPAID EXPENSES AND OTHER ASSETS

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


	June 30,		December 31,
	2022		2021
Prepaid expenses and other current assets
Prepaid expenses	$	129,797	$	123,246

Deposits	5,538		9,658
Other	11,128		2,945



Total prepaid expenses and other current assets	$	146,463	$	135,849

Other non-current assets

Strategic investments	$	350,910	$	363,950
Deferred tax assets	909,557		573,547
Deposits	12,425		13,347
Other	1,823		1,463
Total other non-current assets	$	1,274,715	$	952,307

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Strategic investments

The Company makes strategic investments in various companies and technologies through Coinbase Ventures. 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, and accordingly, 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) and impairment. The changes in the carry value of strategic investments accounted for under the measurement alternative are presented below (in thousands):


	Six Months Ended June 30,
		2022		2021
Carrying amount, beginning of period		$	352,431	$	26,146
Net additions(1)		47,208		40,071
Upward adjustments		879		2,379
Previously held interest in Bison Trails (see Note 4)		—		(2,000)
Impairments and downward adjustments		(69,054)		(50)

Carrying amount, end of period(2)		$	331,464	$	66,546

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

(2)Excludes $19.4 million and $11.5 million as at June 30, 2022 and June 30, 2021, respectively, of strategic investments that are not accounted for under the measurement alternative.

Upward adjustments, impairments and downward adjustments from remeasurement of investments are included in Other expense (income), net in the condensed consolidated statements of operations. As of June 30, 2022, cumulative upward adjustments were $4.8 million and cumulative impairments and downward adjustments were $69.6 million. As of December 31, 2021, cumulative upward adjustments and cumulative impairments and downward adjustments were $4.6 million and $0.5 million, respectively.

During the six months ended June 30, 2022 and June 30, 2021, the Company invested an aggregate of $3.9 million and $1.2 million, respectively, in investees in which certain related parties of the Company held an interest over 10%.

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	June 30,		December 31,
	2022		2021






Accrued expenses	$	220,566	$	195,810

Accrued payroll and payroll related	143,882		146,313
Income taxes payable	9,652		4,553

Short-term borrowings	504		20,060
Other payables(1)	82,795		72,823
Total accrued expenses and other current liabilities	$	457,399	$	439,559

(1)Includes Other payables denominated in crypto assets of $7.2 million as of June 30, 2022 and an immaterial amount as of December 31, 2021.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 were 4.25% and 5.00% per annum as of June 30, 2022 and December 31, 2021, respectively. During the six months ended June 30, 2022, the Company repaid an aggregate of $170.0 million of Short-term borrowings, including borrowings which were secured by Bitcoin with a value equal to 200% of the outstanding principal.

11. INDEBTEDNESS

The components of Indebtedness were as follows as of June 30, 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	$	(26,465)	$	1,411,035
3.38% 2028 Senior Notes due on October 1, 2028	3.57	%	1,000,000		(10,801)		989,199
3.63% 2031 Senior Notes due on October 1, 2031	3.77	%	1,000,000		(11,201)		988,799
Total			$	3,437,500	$	(48,467)	$	3,389,033

The components of Indebtedness were as follows as of December 31, 2021 (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	$	(29,436)	$	1,408,064
3.38% 2028 Senior Notes due on October 1, 2028	3.57	%	1,000,000		(11,565)		988,435
3.63% 2031 Senior Notes due on October 1, 2031	3.77	%	1,000,000		(11,704)		988,296
Total			$	3,437,500	$	(52,705)	$	3,384,795

Convertible Senior Notes

In May 2021, the Company issued an aggregate principal amount of $1.44 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”).

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.

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 June 30, 2022.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Interest

The following table summarizes the Interest expense for the 2026 Convertible Notes, the 2028 Senior Notes and the 2031 Senior Notes (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Coupon interest	$	19,234	$	800	$	38,641	$	800
Amortization of debt discount and issuance costs	2,168		700		4,238		700
Total	$	21,402	$	1,500	$	42,879	$	1,500

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

12. DERIVATIVES

The following outlines the Company’s derivatives and the related hedge accounting designation, as applicable.


Type of derivative	Description of derivative	Location of host contract and derivative on balance sheet
Crypto asset borrowings(1)	The Company borrows crypto assets that result in the obligation to deliver a fixed amount of crypto assets in the future.	Crypto asset borrowings
Accounts receivable denominated in crypto assets	The Company provides 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.	Accounts and loans receivable, net of allowance
Other payables denominated in crypto assets	The Company enters 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 futures(1)	The Company enters 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

(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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Impact of derivatives on the condensed consolidated balance sheets

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


	June 30,		December 31,
	2022		2021
Designated as hedging instrument
Crypto asset borrowings with embedded derivatives	$	234,805	$	669,445
Crypto asset futures	2,342		—



Not designated as hedging instrument
Accounts receivable denominated in crypto assets	15,523		17,415
Other payables denominated in crypto assets	16,815		—

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


	Gross derivative assets						Gross derivative liabilities
June 30, 2022	Not designated as hedges		Designated as hedges		Total derivative assets		Not designated as hedges		Designated as hedges		Total derivative liabilities
Crypto asset borrowings with embedded derivatives(1)	$	—	$	99,989	$	99,989	$	—	$	1,732	$	1,732
Accounts receivable denominated in crypto assets	—		—		—		8,824		—		8,824
Other payables denominated in crypto assets	9,574		—		9,574		—		—		—

Total fair value of derivative assets and liabilities	$	9,574	$	99,989	$	109,563	$	8,824	$	1,732	$	10,556

(1) During the six months ended June 30, 2022, the fee on these borrowings ranged from 0.0% to 7.5%. During the six months ended June 30, 2021, the fee on these borrowings ranged from 0.0% to 3.5%. During the three and six months ended June 30, 2022, the Company incurred $1.6 million and $3.0 million, respectively, of borrowing fees in crypto assets. During the three and six months ended June 30, 2021, the Company incurred $2.9 million and $7.2 million, respectively, of borrowing fees in crypto assets. Borrowing fees are included in Other operating expense, net in the condensed consolidated statements of operations.


	Gross derivative assets						Gross derivative liabilities
December 31, 2021	Not designated as hedges		Designated as hedges		Total derivative assets		Not designated as hedges		Designated as hedges		Total derivative liabilities
Crypto asset borrowings with embedded derivatives	$	—	$	336,396	$	336,396	$	—	$	93,616	$	93,616
Accounts receivable denominated in crypto assets	9,033		—		9,033		—		—		—
Total fair value of derivative assets and liabilities	$	9,033	$	336,396	$	345,429	$	—	$	93,616	$	93,616

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Impact of derivatives on the condensed consolidated statements of operations

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


	Gains (losses) recorded in Other operating expense, net
	Three Months Ended June 30, 2022						Three Months Ended June 30, 2021
	Derivatives		Hedged items		Income statement impact		Derivatives		Hedged items		Income statement impact
Designated as fair value hedging instruments
Crypto asset borrowings with embedded derivatives	$	355,071	$	(356,416)	$	(1,345)	$	448,957	$	(427,240)	$	21,717
Crypto asset futures	15,678		(15,005)		673		—		—		—
Not designated as hedging instruments
Crypto asset borrowings with embedded derivatives	6,626		—		6,626		—		—		—
Accounts receivable denominated in crypto assets	(5,350)		—		(5,350)		—		—		—
Other payables denominated in crypto assets	2,510		—		2,510		—		—		—
Crypto asset futures	1,181		—		1,181		—		—		—
Total	$	375,716	$	(371,421)	$	4,295	$	448,957	$	(427,240)	$	21,717


	Gains (losses) recorded in Other operating expense, net
	Six Months Ended June 30, 2022						Six Months Ended June 30, 2021
	Derivatives		Hedged items		Income statement impact		Derivatives		Hedged items		Income statement impact
Designated as fair value hedging instruments
Crypto asset borrowings with embedded derivatives	$	360,069	$	(361,340)	$	(1,271)	$	181,557	$	(169,116)	$	12,441
Crypto asset futures	13,012		(12,262)		750		—		—		—
Not designated as hedging instruments
Crypto asset borrowings with embedded derivatives	6,626		—		6,626		—		—		—
Accounts receivable denominated in crypto assets	(10,263)		—		(10,263)		—		—		—
Other payables denominated in crypto assets	2,510		—		2,510		—		—		—
Crypto asset futures	(511)		—		(511)		—		—		—
Total	$	371,443	$	(373,602)	$	(2,159)	$	181,557	$	(169,116)	$	12,441

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following amounts were recorded in the condensed consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the condensed 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
June 30, 2022	Carrying amount of the hedged items		Active hedging relationships		Discontinued hedging relationships		Total
Crypto assets held	$	136,286	$	93,318	$	(3,333)	$	89,985


			Cumulative amount of fair value hedging adjustments included in the carrying amount of hedged items
December 31, 2021	Carrying amount of the hedged items		Active hedging relationships		Discontinued hedging relationships		Total
Crypto assets held	$	421,685	$	(240,771)	$	—	$	(240,771)

13. 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):


	June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(1)	$	2,773,062	$	—	$	—	$	2,773,062
Customer custodial cash(2)	1,819,169		—		—		1,819,169
Crypto assets held(3)	136,286		—		—		136,286
Derivative assets(4)	—		109,563		—		109,563
Customer crypto assets	—		88,453,873		—		88,453,873
Total assets	$	4,728,517	$	88,563,436	$	—	$	93,291,953

Liabilities

Derivative liabilities(4)	$	—	$	10,556	$	—	$	10,556
Contingent consideration arrangement	—		—		6,605		6,605
Customer crypto liabilities	—		88,453,873		—		88,453,873
Total liabilities	$	—	$	88,464,429	$	6,605	$	88,471,034

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(1)	$	4,813,621	$	—	$	—	$	4,813,621
Customer custodial cash(2)	3,566,072		—		—		3,566,072
Crypto assets held(3)	—		421,685		—		421,685
Derivative assets(4)	—		345,429		—		345,429

Total assets	$	8,379,693	$	767,114	$	—	$	9,146,807

Liabilities
Derivative liabilities(4)	$	—	$	93,616	$	—	$	93,616
Contingent consideration arrangement	—		—		14,828		14,828

Total liabilities	$	—	$	93,616	$	14,828	$	108,444

(1)Represents money market funds. Excludes $2.7 billion of corporate cash held in deposit at banks and $168.9 million held at venues, which were not measured and recorded at fair value as of June 30, 2022. Excludes $2.1 billion of corporate cash held in deposit at banks and $168.9 million held at venues, which were not measured and recorded at fair value as of December 31, 2021.

(2)Represents money market funds. Excludes Customer custodial cash of $5.4 billion and $7.0 billion held in deposit at financial institutions and not measured and recorded at fair value as of June 30, 2022 and December 31, 2021.

(3)Includes Crypto assets held that have been designated as hedged items in fair value hedges and excludes crypto assets of $403.4 million and $566.5 million held at cost as of June 30, 2022 and December 31, 2021, respectively.

(4)Excludes crypto asset borrowings of $234.8 million and $669.4 million, representing the host liability contract which is not measured and recorded at fair value as of June 30, 2022 and December 31, 2021, respectively. Excludes the host contract of $15.5 million and $17.4 million related to Accounts receivable denominated in crypto assets as of June 30, 2022 and December 31, 2021, respectively. Excludes the host contract of $16.8 million and an immaterial amount related to Other payables denominated in crypto assets as of June 30, 2022 and December 31, 2021, respectively.

The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the six months ended June 30, 2022 and the year ended December 31, 2021.

Customer crypto assets and liabilities represent the Company’s obligation to safeguard customers’ 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.

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 predominately on Level 3 inputs. The carrying value of our strategic investments is adjusted based on an Option-Pricing Model (“OPM”) 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 cash, USDC, Customer custodial cash liabilities, Short-term borrowings and Loans receivable are carried at amortized cost, which approximates their fair value. 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 June 30, 2022, the estimated fair value of the 2026 Convertible Notes and Senior Notes were $0.82 billion and $1.19 billion, respectively.

14. COMMON STOCK

Effective April 1, 2021, the Company amended and restated its certificate of incorporation to authorize 10,000,000,000 shares of Class A common stock, 500,000,000 shares of Class B common stock, 500,000,000 shares of undesignated common stock, and 500,000,000 shares of undesignated preferred stock. 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 Company’s board of directors. 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 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. 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. 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company has reserved shares of Class A common stock and Class B common stock for issuance for the following purposes (in thousands):


	June 30,	December 31,
	2022	2021
Class A common stock

Options issued and outstanding under the 2013 Amended and Restated Stock Plan (the “2013 Plan”)	1,083	1,569

Options issued and outstanding under the 2019 Equity Incentive Plan (the “2019 Plan”)	27,035	29,311
RSUs issued and outstanding under the 2019 Plan	3,571	5,851

Options issued and outstanding under the 2021 Equity Incentive Plan (the “2021 Plan”)	788	—
RSUs issued and outstanding under the 2021 Plan	4,529	1,402
Shares available for future issuance under the 2021 Plan	43,417	35,856
Shares available for future issuance under the 2021 Employee Stock Purchase Plan (the “ESPP”)	7,097	5,125
Replacement options issued and outstanding from the Tagomi acquisition	4	4
Replacement options issued and outstanding from the Bison Trails acquisition	175	223
RSUs issued and outstanding from other acquisitions	229	229

Shares available for future issuance of warrants	2,296	2,296
Total Class A common stock shares reserved	90,224	81,866

Class B common stock
Options issued and outstanding under the 2013 Plan	5,322	6,101

Total Class B common stock shares reserved	5,322	6,101

15. STOCK-BASED COMPENSATION

Stock options

Activity of options outstanding are 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, 2022	37,208	$	18.60	7.83	$	8,698,078
Issued	793	200.19
Exercised	(2,207)	14.47
Forfeited and cancelled	(1,387)	21.96

Balance at June 30, 2022	34,407	22.91		7.40	950,079

Vested and exercisable at June 30, 2022	17,629	17.04		6.58	547,220
Vested and expected to vest at June 30, 2022	28,273	22.80		7.25	805,562

During the three and six months ended June 30, 2022, the Company granted stock options for the purchase of 68,745 and 793,496 shares of the Company’s Class A common stock with a weighted-average grant date fair value of $49.09 and $90.60 per share, respectively, to certain employees of the Company. The stock options vest over three years at a rate of 1/12 per quarter.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2022, there was total unrecognized compensation cost of $186.2 million related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately 2.6 years.

The assumptions used under the Black-Scholes-Merton option pricing model and the weighted average calculated value of the options granted to employees were as follows:


	Three Months Ended June 30,			Six Months Ended June 30,
	2022		2021	2022		2021
Dividend yield	0.0	%	N/A	0.0	%	0.0	%
Expected volatility	67.6	%	N/A	56.2	%	44.0	%
Expected term (in years)	5.8		N/A	5.8		4.8
Risk-free interest rate	3.1	%	N/A	1.9	%	0.5	%

As of June 30, 2022, there were 282,221 shares subject to repurchase related to stock options exercised early and not yet vested, but that are expected to vest. As of June 30, 2022, the Company recorded a liability related to these shares subject to repurchase in the amount of $5.8 million, which is included within Accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets.

Chief Executive Officer performance award

During the three and six months ended June 30, 2022, stock-based compensation expense of $1.0 million and $1.9 million, respectively, was recognized related to this award. During both the three and six months ended June 30, 2021, compensation expense of $6.4 million was recognized related to this award.

Restricted stock units

The Company’s RSUs 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.

Activity of RSUs outstanding are as follows (in thousands, except per share data):


	Number of shares	Weighted-Average Grant Date Fair Value Per Share
Balance at January 1, 2022	7,482	$	157.22
Granted	7,026	154.38
Vested	(4,903)	150.95
Forfeited and cancelled	(1,276)	168.05
Balance at June 30, 2022	8,329	156.86

For RSUs granted during the three months and six months ended June 30, 2022, the closing price of the Company’s Class A common stock as reported on The Nasdaq Global Select Market on the grant date was used as the fair value.

As of June 30, 2022, there was total unrecognized compensation cost of $1.2 billion related to unvested RSUs. These costs are expected to be recognized over a weighted-average period of approximately 1.76 years.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Restricted common stock

As part of the Company’s acquisitions, the Company issued 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 for which 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, 2022	2,014	$	137.57
Granted	323	137.05
Vested	(667)	141.18
Forfeited and cancelled	—	—
Balance at June 30, 2022	1,670	136.03

As of June 30, 2022, there was total unrecognized compensation cost of $191.1 million related to unvested restricted Class A common stock. These costs are expected to be recognized over a weighted-average period of approximately 1.85 years.

Employee Stock Purchase Plan

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 Company recognizes stock-based compensation expenses related to purchase rights issued pursuant to its ESPP on a straight-line basis over the offering period, which is 24 months. The fair value of purchase rights under the ESPP are estimated on the date of grant using the Black-Scholes-Merton option valuation model.

The grant date of the initial offering period was May 3, 2021, and that offering period shall end on April 30, 2023. As of June 30, 2022, the Company recorded a liability of $4.6 million 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 in the accompanying condensed consolidated balance sheets.

Stock-based compensation expense

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Technology and development	$	261,232	$	130,988	$	517,756	$	204,245
Sales and marketing	19,396		6,674		34,352		10,204
General and administrative	110,868		51,673		191,529		79,514

Total	$	391,496	$	189,335	$	743,637	$	293,963

During the three and six months ended June 30, 2022, $70.1 million and $71.5 million of stock-based compensation expense was included in Capitalized software, respectively. During the three and six months ended June 30, 2021, $0 and $0.7 million of stock-based compensation expense was included in Capitalized software, respectively.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

16. INCOME TAXES

The Company calculates the tax provision for interim periods using an estimated annual effective tax rate applied to year-to-date ordinary income and adjusts for discrete items in the quarter. In each quarter, the estimate of the annual effective tax rate is updated and an adjustment is made in the year-to-date provision. The annual effective tax rate is subject to fluctuation due to factors including changing assumptions on forecasted annual pretax income, certain book and tax differences, valuation allowances against deferred tax assets, or changes in or interpretation of tax laws.

The Company’s effective tax rate (“ETR”) for the three months ended June 30, 2022 and June 30, 2021 was 11.8% and (84.9)%, respectively. The ETR of 11.8% for the three months ended June 30, 2022 was lower than the U.S. statutory rate of 21.0% due primarily to a valuation allowance on deferred tax assets associated with impairment charges and lower deductible stock compensation expense during the quarter.

The Company’s ETR for the six months ended June 30, 2022 and June 30, 2021 was 17.7% and (27.5)%, respectively. The ETR of 17.7% for the six months ended June 30, 2022 was lower than the U.S. statutory rate of 21.0% primarily due to a valuation allowance on deferred tax assets associated with impairment charges and non-deductible compensation, offset by a tax benefit for U.S. state taxes and U.S. federal research and development credits.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

17. NET (LOSS) INCOME PER SHARE

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Basic net (loss) income per share:
Numerator
Net (loss) income	$	(1,093,654)	$	1,606,349	$	(1,523,313)	$	2,377,812
Less: Income allocated to participating securities	—		(16,636)		—		(699,903)

Net (loss) income attributable to common stockholders, basic	$	(1,093,654)	$	1,589,713	$	(1,523,313)	$	1,677,909

Denominator
Weighted-average shares of common stock used to compute net (loss) income per share attributable to common stockholders, basic	220,988		204,728		219,240		142,397
Net (loss) income per share attributable to common stockholders, basic	$	(4.95)	$	7.77	$	(6.95)	$	11.78

Diluted net (loss) income per share:
Numerator
Net (loss) income	$	(1,093,654)	$	1,606,349	$	(1,523,313)	$	2,377,812
Less: Income allocated to participating securities	—		(13,750)		—		(573,503)
Add: Interest on convertible notes, net of tax	—		551		—		551
Less: Fair value gain on contingent consideration arrangement, net of tax	(6,184)		—		(6,184)		—
Net (loss) income attributable to common stockholders - diluted	$	(1,099,838)	$	1,593,150	$	(1,529,497)	$	1,804,860

Denominator
Weighted-average shares of common stock used to compute net (loss) income per share attributable to common stockholders, basic	220,988		204,728		219,240		142,397
Weighted-average effect of potentially dilutive securities:
Stock options	—		37,644		—		41,068
RSUs	—		4,047		—		3,444
Restricted common stock	—		3		—		1
Warrants	—		—		—		145
Convertible notes	—		1,725		—		863
Contingent consideration	46		—		46		—
Weighted-average shares of common stock used to compute net (loss) income per share attributable to common stockholders, diluted	221,034		248,147		219,286		187,918

Net (loss) income per share attributable to common stockholders, diluted	$	(4.98)	$	6.42	$	(6.97)	$	9.60

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Certain shares of restricted Class A common stock granted as consideration in acquisitions and the Company’s convertible 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):


	Three Months Ended June 30		Six Months Ended June 30
	2022	2021	2022	2021
Stock options	34,407	6,134	34,407	6,134
RSUs	8,330	1,807	8,330	1,807
Convertible notes	3,880	—	3,880	—
Restricted common stock	1,998	—	1,998	—
Employee stock purchase plan	1,596	263	1,596	263

Total	50,211	8,204	50,211	8,204

18. 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.

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 condensed 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 Company disputes the claims in this matter and is vigorously defending against them. The plaintiff seeks, among other relief, unspecified compensatory damages, attorneys’ fees, and costs. Based on the preliminary nature of the proceedings in this matter, 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 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 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 seek injunctive relief, unspecified damages, attorneys’ fees and costs. The Company and other defendants dispute the claims in this case and intend to vigorously defend against them. 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.

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.

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, is currently subject to an investigation by the NYDFS relating to its compliance program including compliance with the Bank Secrecy Act and sanctions laws, cybersecurity, and customer support. Coinbase, Inc. is cooperating fully and has undertaken initial remedial measures, and may face additional remedial and other measures. Based on the ongoing nature of the investigation, 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company has received investigative subpoenas and requests from the SEC 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. Based on the ongoing nature of these matters, the outcomes remain uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time.

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 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.

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