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,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	5,166,733	$	4,425,021
Restricted cash	20,697		25,873
Customer custodial funds	3,848,078		5,041,119
Customer crypto assets(1)	124,243,587		75,413,188
USDC	315,508		861,149
Accounts and loans receivable, net of allowance	427,210		404,376
Income tax receivable	64,759		60,441
Prepaid expenses and other current assets	175,399		217,048
Total current assets	134,261,971		86,448,215
Crypto assets held	485,347		424,393
Lease right-of-use assets	18,210		69,357
Property and equipment, net	186,046		171,853
Goodwill	1,139,670		1,073,906
Intangible assets, net	108,134		135,429
Other non-current assets	1,451,197		1,401,720

Total assets	$	137,650,575	$	89,724,873

Liabilities and Stockholders’ Equity
Current liabilities:
Customer custodial cash liabilities	$	3,848,078	$	4,829,587
Customer crypto liabilities(2)	124,243,587		75,413,188
Accounts payable	27,983		56,043
Accrued expenses and other current liabilities	262,251		331,236
Crypto asset borrowings	144,503		151,505
Lease liabilities, current	12,350		33,734

Total current liabilities	128,538,752		80,815,293

Lease liabilities, non-current	8,611		42,044


Long-term debt	3,334,257		3,393,448
Other non-current liabilities	14,252		19,531
Total liabilities	131,895,872		84,270,316

Commitments and contingencies (Note 19)


Stockholders’ equity:
Class A common stock, $0.00001 par value; 10,000,000 shares authorized at June 30, 2023 and December 31, 2022; 189,498 and 182,796 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	2		2
Class B common stock, $0.00001 par value; 500,000 shares authorized at June 30, 2023 and December 31, 2022; 47,390 and 48,070 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively	—		—

Additional paid-in capital	4,239,319		3,767,686
Accumulated other comprehensive loss	(33,792)		(38,606)
Retained earnings	1,549,174		1,725,475
Total stockholders’ equity	5,754,703		5,454,557
Total liabilities and stockholders’ equity	$	137,650,575	$	89,724,873

(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,
	2023		2022		2023		2022
Revenue:




Net revenue	$	662,500	$	802,603	$	1,398,898	$	1,967,494
Other revenue	45,411		5,722		81,542		7,267
Total revenue	707,911		808,325		1,480,440		1,974,761
Operating expenses:
Transaction expense	108,200		167,187		204,569		445,013
Technology and development	320,667		609,249		678,698		1,179,913
Sales and marketing	83,853		140,894		147,829		341,098
General and administrative	258,988		470,169		507,749		883,747
Restructuring	(1,035)		42,453		143,454		42,453

Other operating expense (income), net	10,813		422,762		(4,409)		681,389

Total operating expenses	781,486		1,852,714		1,677,890		3,573,613

Operating loss	(73,575)		(1,044,389)		(197,450)		(1,598,852)

Interest expense	21,672		23,656		43,208		45,794
Other (income) expense, net	(16,564)		172,524		3,701		205,368

Loss before income taxes	(78,683)		(1,240,569)		(244,359)		(1,850,014)

Provision for (benefit from) income taxes	18,722		(146,915)		(68,058)		(326,701)

Net loss	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)






Net loss attributable to common stockholders:
Basic	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)
Diluted	$	(97,601)	$	(1,099,838)	$	(176,497)	$	(1,529,497)

Net loss per share attributable to common stockholders:
Basic	$	(0.42)	$	(4.95)	$	(0.76)	$	(6.95)
Diluted	$	(0.42)	$	(4.98)	$	(0.76)	$	(6.97)

Weighted-average shares of common stock used to compute net loss per share attributable to common stockholders:
Basic	234,614		220,988		233,060		219,240
Diluted	234,641		221,034		233,087		219,286

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)

Other comprehensive (loss) income:
Translation adjustment, net of tax	(5,383)		(14,293)		4,814		(14,788)

Comprehensive loss	$	(102,788)	$	(1,107,947)	$	(171,487)	$	(1,538,101)

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(In thousands)

(unaudited)


	Three Months Ended June 30,
				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings
	Common Stock
	Shares	Amount				Total
Balance at April 1, 2023	234,495	$	2	$	4,056,774	$	(28,409)	$	1,646,579	$	5,674,946
Issuance of common stock upon exercise of stock options, net of repurchases	467	—		8,435		—		—		8,435
Stock-based compensation expense	—	—		214,624		—		—		214,624




Issuance of common stock upon settlement of Restricted Stock Units ("RSUs") and restricted common stock, net of shares withheld	1,672	—		(52,895)		—		—		(52,895)

Issuance of common stock under the Employee Stock Purchase Plan (the “ESPP”)	254	—		12,381		—		—		12,381


Comprehensive loss	—	—		—		(5,383)		—		(5,383)
Net loss	—	—		—		—		(97,405)		(97,405)
Balance at June 30, 2023	236,888	$	2	$	4,239,319	$	(33,792)	$	1,549,174	$	5,754,703

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 RSUs and restricted common stock, net of shares withheld	1,803	—		(71,301)		—		—		(71,301)

Issuance of common stock under the ESPP	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

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

Coinbase Global, Inc.

Condensed Consolidated Statements of Changes in Stockholders' Equity

(In thousands)

(unaudited)


	Six Months Ended June 30,
				Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Retained Earnings
	Common Stock
	Shares	Amount				Total
Balance at January 1, 2023	230,866	$	2	$	3,767,686	$	(38,606)	$	1,725,475	$	5,454,557
Issuance of common stock upon exercise of stock options, net of repurchases	1,180	—		18,001		—		—		18,001
Stock-based compensation expense	—	—		427,606		—		—		427,606
Issuance of equity instruments as consideration for business combination	961	—		44,995		—		—		44,995



Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld	3,627	—		(115,392)		—		—		(115,392)

Issuance of common stock under the ESPP	254	—		12,381		—		—		12,381
Stock-based compensation expense recognized in relation to restructuring	—	—		84,042		—		—		84,042

Comprehensive income	—	—		—		4,814		—		4,814
Net loss	—	—		—		—		(176,301)		(176,301)
Balance at June 30, 2023	236,888	$	2	$	4,239,319	$	(33,792)	$	1,549,174	$	5,754,703

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 ESPP	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

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,
	2023		2022
Cash flows from operating activities
Net loss	$	(176,301)	$	(1,523,313)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	78,190		73,607
Investment impairment expense	8,226		69,289
Other impairment expense	8,113		7,949
Stock-based compensation expense	398,632		743,637
Restructuring stock-based compensation expense	84,042		—
Provision for transaction losses and doubtful accounts	1,809		(9,016)
Loss on disposal of property and equipment	7,734		—
Deferred income taxes	(71,435)		(337,520)
Unrealized loss on foreign exchange	16,435		115,072

Non-cash lease expense	34,173		14,451
Change in fair value of contingent consideration	(262)		(8,223)
Loss on investments	23		1,830
Fair value (gain) loss on derivatives	(13,930)		952
Amortization of debt discount and issuance costs	4,403		4,838
Gain on extinguishment of long-term debt, net	(17,855)		—
Realized loss on crypto futures contract	43,339		—
Crypto asset impairment expense	54,333		663,159
Crypto assets received as revenue	(211,923)		(290,209)
Crypto asset payments for expenses	135,002		265,816
Realized gain on crypto assets	(95,390)		(19,121)
Changes in operating assets and liabilities:
USDC	508,752		(287,984)
Accounts and loans receivable	(36,579)		7,359
Deposits in transit	(88,680)		36,333
Income taxes, net	(7,012)		4,058

Other current and non-current assets	31,003		(663)
Accounts payable	(28,495)		659
Lease liabilities	(32,361)		(4,033)
Other current and non-current liabilities	(19,784)		28,585
Net cash provided by (used in) operating activities	614,202		(442,488)
Cash flows from investing activities
Purchase of property and equipment	(379)		(3,741)
Proceeds from sale of property and equipment	103		—
Capitalized internal-use software development costs	(30,587)		(32,088)
Business combinations, net of cash acquired	(30,730)		(186,150)
Purchase of investments	(4,808)		(46,902)

Proceeds from settlement of investments	1,133		1,497
Loans originated	(144,283)		(166,648)
Proceeds from repayment of loans	109,630		259,104
Assets pledged as collateral	(839)		—
Assets pledged as collateral returned	42,383		—
Settlement of crypto futures contract	(43,339)		—
Purchase of crypto assets held	(99,064)		(1,204,918)
Disposal of crypto assets held	188,026		761,226
Net cash used in investing activities	(12,754)		(618,620)

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,
	2023		2022
Cash flows from financing activities
Issuance of common stock upon exercise of stock options, net of repurchases	16,649		31,866
Taxes paid related to net share settlement of equity awards	(115,392)		(213,133)
Proceeds received under the ESPP	8,985		12,031
Other financing activities	—		3,679
Customer custodial cash liabilities	(987,957)		(3,421,287)






Repurchases of 2026 Convertible Notes	(45,469)		—
Assets received as collateral	5,169		—
Assets received as collateral returned	(3,766)		—
Proceeds from short-term borrowings	31,640		149,400
Repayments of short-term borrowings	(52,122)		(170,000)
Net cash used in financing activities	(1,142,263)		(3,607,444)

Net decrease in cash, cash equivalents, and restricted cash	(540,815)		(4,668,552)

Effect of exchange rates on cash, cash equivalents, and restricted cash	(4,370)		(119,932)

Cash, cash equivalents, and restricted cash, beginning of period	9,429,646		17,680,662

Cash, cash equivalents, and restricted cash, end of period	$	8,884,461	$	12,892,178

Cash, cash equivalents, and restricted cash consisted of the following:
Cash and cash equivalents	$	5,166,733	$	5,682,068
Restricted cash	20,697		28,962
Customer custodial cash	3,697,031		7,181,148
Total cash, cash equivalents, and restricted cash	$	8,884,461	$	12,892,178

Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	38,684	$	43,630
Cash paid during the period for income taxes	10,669		10,002
Operating cash outflows for amounts included in the measurement of operating lease liabilities	7,559		7,020

Supplemental schedule of non-cash investing and financing activities
Unsettled purchases of property and equipment	$	—	$	283
Right-of-use assets obtained in exchange for operating lease obligations	135		3,240
Non-cash consideration paid for business combinations	51,494		324,925
Purchase of crypto assets and investments with non-cash consideration	9,330		17,096

Disposal of crypto assets for non-cash consideration	7,283		—
Crypto assets borrowed	272,590		505,176
Crypto assets borrowed repaid with crypto assets	304,433		935,792
Realized gain on crypto assets held as investments	48,491		—
Non-cash assets pledged as collateral	63,460		—
Non-cash assets pledged as collateral returned	42,514		—
Non-cash assets received as collateral	59,516		—
Non-cash assets received as collateral returned	86,390		—

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 consumers 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 developers 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 the 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, 2023 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, 2022 filed with the Securities and Exchange Commission (the “SEC”) on February 21, 2023 (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 loss.

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 funds and customer custodial cash liabilities

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

Certain jurisdictions where the Company operates require the Company to hold eligible liquid assets, as defined by applicable regulatory requirements and commercial law in these jurisdictions, equal to at least 100% of the aggregate amount of all customer custodial cash liabilities. Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial funds, and certain other customer receivables. As of June 30, 2023 and December 31, 2022, the Company’s eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Concentration of credit risk

The Company’s cash and cash equivalents, restricted cash, customer custodial funds, and accounts and loans receivable are potentially subject to concentration of credit risk. Cash and cash equivalents, restricted cash, and customer custodial funds are primarily placed with financial institutions which are of high credit quality. The Company invests cash and cash equivalents, and customer custodial funds primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have corporate deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company has not experienced losses on these accounts and does not believe it is exposed to any significant credit risk with respect to these accounts. The 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 $315.5 million and $861.1 million of USDC as of June 30, 2023 and December 31, 2022, respectively. The issuer of USDC reported that, as of June 30, 2023, underlying reserves were held in cash, short-duration U.S. Treasuries, and overnight U.S. Treasury repurchase agreements within segregated accounts for the benefit of USDC holders.

As of June 30, 2023 and December 31, 2022, the Company had one counterparty who accounted for more than 10% of the Company’s accounts and loans receivable, net.

During the three and six months ended June 30, 2023 and June 30, 2022, one and no counterparty accounted for more than 10% of total revenue, respectively.

Recent accounting pronouncements

Accounting pronouncements pending adoption

On March 28, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-01, Leases (Topic 842): Common Control Arrangements (“ASU 2023-01”). The amendments in ASU 2023-01 improve current GAAP by clarifying the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in practice. Additionally, the amendments provide investors and other allocators of capital with financial information that better reflects the economics of those transactions. 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.

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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

3. RESTRUCTURING

2023 Restructuring

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

The Company does not expect to incur any additional charges in connection with the 2023 Restructuring and the cash payments associated with this restructuring were substantially completed during the second quarter of 2023 with the remainder expected to be paid out by December 31, 2023. The following expenses were recognized within restructuring expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2023 (in thousands):


	Three Months Ended June 30, 2023		Six Months Ended June 30, 2023
Separation pay(1)	$	(152)	$	57,593
Stock-based compensation(2)	—		84,042
Other personnel costs(1)	(883)		1,819
Total	$	(1,035)	$	143,454

(1)The negative adjustment of $0.2 million and $0.9 million during the three months ended June 30, 2023 is due to the release of accruals for certain separation pay expenses and other personnel costs, respectively, recorded as of March 31, 2023 which were not utilized.

(2)Represents stock-based compensation expenditures for the six months ended June 30, 2023 relating to the acceleration of the vesting of outstanding equity awards in accordance with the terms of such awards.

The following table summarizes the balance of the 2023 Restructuring reserve and the changes in the reserve as of and for the six months ended June 30, 2023 (in thousands):


	Expenses Incurred(1)		Payments		Adjustments		Accrued Balance as of June 30, 2023
Separation pay	$	57,745	$	(56,180)	$	(152)	$	1,413
Other personnel costs	2,702		(1,620)		(883)		199
Total	$	60,447	$	(57,800)	$	(1,035)	$	1,612

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

2022 Restructuring

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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):


	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Separation pay	$	39,259	$	39,259

Other personnel costs	3,194		3,194
Total	$	42,453	$	42,453

The following table summarizes the balance of the 2022 Restructuring reserve and the changes in the reserve as of and for the six months ended June 30, 2022 (in thousands). The associated liability that remained outstanding as of June 30, 2022 was recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheets:


	Expenses Incurred		Payments		Adjustments		Accrued Balance as of June 30, 2022
Separation pay	$	39,259	$	—	$	—	$	39,259
Other personnel costs	3,194		—		—		3,194
Total	$	42,453	$	—	$	—	$	42,453

4. ACQUISITIONS

2023 acquisitions

One River Digital Asset Management, LLC

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

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

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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


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

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

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


Cash and cash equivalents	$	100
Accounts and loans receivable, net of allowance	425
Prepaid expenses and other current assets	134
Goodwill	65,764
Intangible assets, net	21,100
Other non-current assets	9,911
Total assets	97,434

Accounts payable	604
Total liabilities	604
Net assets acquired	$	96,830

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


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

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

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

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 year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $4.1 million and a corresponding reduction in goodwill.

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


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

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

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, net	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
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.

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 consumers 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 year ended December 31, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $0.3 million and a corresponding reduction in goodwill.

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


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

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

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, net	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)

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,
	2023		2022		2023		2022
Net revenue
Transaction revenue









Consumer, net	$	310,037	$	616,212	$	662,439	$	1,582,054
Institutional, net	17,061		39,001		39,372		86,196
Total transaction revenue	327,098		655,213		701,811		1,668,250
Subscription and services revenue
Blockchain rewards	87,613		68,410		161,363		150,305
Custodial fee revenue	16,992		22,178		34,034		53,872
Interest income	201,364		32,514		442,186		42,968

Other subscription and services revenue	29,433		24,288		59,504		52,099
Total subscription and services revenue	335,402		147,390		697,087		299,244
Total net revenue	662,500		802,603		1,398,898		1,967,494
Other revenue
Crypto asset sales revenue	—		48		—		617
Corporate interest and other income	45,411		5,674		81,542		6,650
Total other revenue	45,411		5,722		81,542		7,267
Total revenue	$	707,911	$	808,325	$	1,480,440	$	1,974,761

Transaction revenue

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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, or trade derivatives. That is, the Company is an agent in transactions between customers and presents revenue for the fees earned on a net basis.

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

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

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

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Blockchain rewards

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. Blockchain protocols, or the participants that form the protocol networks, reward users for performing various activities on the blockchain. The most common form today is participating in proof-of-stake networks, however, there are other consensus algorithms. The Company considers itself the principal in transactions with the blockchain networks, and therefore presents such blockchain rewards earned on a gross basis. In exchange for participating in the consensus mechanism of these networks, the Company recognizes revenue in the form of the native token of the network. Each block creation or validation is a performance obligation. Revenue is recognized at the point when the block creation or validation is complete and the rewards are transferred into a digital wallet that the Company controls. Revenue is measured based on the number of tokens received and the fair value of the token at contract inception. Blockchain services offered as part of Coinbase Cloud’s blockchain infrastructure solutions are included in other subscription and services revenue. The Company’s staking revenue is included within blockchain rewards.

Custodial fee revenue

The Company provides a dedicated secure cold storage solution to customers and earns a fee, which is based on a contractual percentage of the daily value of assets under custody. The fee is collected on a monthly basis. These contracts typically have one performance obligation which is provided and satisfied over the term of the contracts as customers simultaneously receive and consume the benefits of the services. The contract may be terminated by a customer at any time, without incurring a penalty. Customers are billed on the last day of the month during which services were provided, with the amounts generally being due within thirty days of receipt of the invoice. Accounts receivable from customers for custodial fee revenue, net of allowance, were $13.6 million and $7.8 million as of June 30, 2023 and December 31, 2022, respectively. The allowance recognized against these fees was not material for any of the periods presented.

Interest income and corporate interest and other income

The Company earns income on fiat funds under a revenue sharing arrangement with the issuer of USDC pursuant to which the Company shares any interest income generated from USDC reserves pro rata based on (i) the amount of USDC distributed by each respective party and (ii) the amount of USDC held on each respective party’s platform. The Company’s income is dependent on the balance of such fiat funds and the prevailing interest rate environment. The Company also earns interest income on loans issued to its consumers and institutional users. Additionally, the Company holds customer custodial funds and cash and cash equivalents at certain third-party banks which earn interest. Interest income earned from customer custodial funds, cash and cash equivalents and loans is calculated using the interest method and is not within the scope of Topic 606 – Revenue from Contracts with Customers. Interest earned on revenue sharing, customer custodial funds, 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 subscription revenue from Coinbase One, revenue from Coinbase Cloud, which includes staking application, delegation, and infrastructure services, Learning Rewards (formerly “Earn”) campaign revenue, and revenue from other subscription licenses. Generally, revenue from other subscription and services contains one performance obligation, may have variable and non-cash consideration, and is recognized at a point in time or over the period that services are provided.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 from related party customers of $4.0 million and $2.6 million for the three months ended June 30, 2023 and June 30, 2022, respectively, and $7.1 million and $7.6 million for the six months ended June 30, 2023 and June 30, 2022, respectively. As of June 30, 2023 and December 31, 2022, amounts receivable from related party customers were $1.4 million and $1.3 million, respectively.

Revenue by geographic location

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
United States	$	637,861	$	667,214	$	1,324,630	$	1,623,047

Rest of the World(1)	70,050		141,111		155,810		351,714
Total revenue	$	707,911	$	808,325	$	1,480,440	$	1,974,761

(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,
	2023		2022
Interest receivable	$	216,035	$	181,647

Custodial fee revenue receivable	15,014		8,434
Loans receivable(1)	132,856		98,203
Crypto asset loans receivable	37,694		85,826
Other receivables(2)	38,920		41,766

Allowance for doubtful accounts(3)	(13,309)		(11,500)
Total accounts and loans receivable, net of allowance	$	427,210	$	404,376

(1)Loans receivable does not include $40.6 million and $2.8 million of receivables denominated in USDC as of June 30, 2023 and December 31, 2022, respectively, as these financial assets did not meet the criteria for derecognition. These amounts are included in USDC in the condensed consolidated balance sheets.

(2)Includes accounts receivables denominated in crypto assets of $5.4 million and $6.9 million as of June 30, 2023 and December 31, 2022, respectively. See Note 13. Derivatives for additional details.

(3)Includes provision for transaction losses of $2.9 million and $3.2 million as of June 30, 2023 and December 31, 2022, respectively.

Loans receivable

The Company issues fiat loans to consumers and institutions. As of May 10, 2023, the Company stopped issuing new loans to consumers and existing consumer borrowers will have until November 20, 2023 to pay back their loans. As of June 30, 2023 and December 31, 2022, the Company had issued loans with an outstanding balance of $132.9 million and $98.2 million, respectively. The related interest receivable on the loans as of June 30, 2023 and December 31, 2022, was $0.9 million and $0.7 million, respectively.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The amounts loaned are collateralized with crypto assets which are either held by the borrower in their crypto asset wallet on the Company’s platform or held directly by the Company. The Company generally does not have the right to use such collateral unless the borrower defaults on the loans. Due to the collateral requirements the Company applies to such loans, the Company's process for collateral maintenance, and collateral held on platform, the Company’s credit exposure is significantly limited and no allowance, write-offs or recoveries were recorded against these loans receivable. The loans are measured at amortized cost. The carrying value of the loans approximates their fair value due to their short-term duration of less than 12 months. As of June 30, 2023 and December 31, 2022, there were no loans receivable past due. See Note 11. Collateral, for additional details regarding the Company’s obligation to return collateral.

Crypto asset loans receivable

The Company enters into transactions where it lends crypto assets to institutional customers. The Company evaluates the crypto asset loans receivable for credit loss. Due to the collateral requirements the Company applies to such loans, the Company's process for collateral maintenance, and collateral held on platform, the Company’s credit exposure is significantly limited and no allowance, write-offs or recoveries were recorded against these crypto asset loans receivable. As of June 30, 2023 and December 31, 2022, there were no crypto asset loans receivable past due.

The Company requires that borrowers pledge assets as collateral for these loans. See Note 11. Collateral, for additional details regarding the Company’s obligation to return collateral.

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, 2023		Year Ended December 31, 2022

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

(1)The measurement period adjustments during the year ended December 31, 2022 consisted of $4.1 million, $0.3 million and $1.9 million related to the Unbound acquisition, FairX acquisition and certain other acquisitions that were material when aggregated, respectively, and which were associated with the changes in deferred tax assets as a result of changes in estimates. There were no measurement period adjustments during the three and six months ended June 30, 2023.

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, 2023	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Weighted Average Remaining Useful Life (in Years)
Amortizing intangible assets
Acquired developed technology	$	119,992	$	(95,042)	$	24,950	2.6
User base	2,997		(2,720)		277		0.3
Customer relationships	103,790		(55,748)		48,042		3.5

Non-compete agreement	2,402		(1,882)		520		1.1
Assembled workforce	60,800		(60,800)		—		—
Trade relationships	3,400		(1,605)		1,795		1.6
In-process research and development(1)	4,300		—		4,300		N/A
Indefinite-lived intangible assets
Domain name	250		—		250		N/A
Licenses	28,000		—		28,000		N/A
Total	$	325,931	$	(217,797)	$	108,134

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


As of December 31, 2022	Gross Carrying Amount		Accumulated Amortization		Intangible Assets, Net		Weighted Average Remaining Useful Life (in Years)
Amortizing intangible assets
Acquired developed technology	$	126,692	$	(81,172)	$	45,520	2.3
User base	2,997		(2,154)		843		0.8
Customer relationships	86,691		(45,717)		40,974		2.6

Non-compete agreement	2,402		(1,641)		761		1.6
Assembled workforce	60,800		(44,857)		15,943		0.4
Trade relationships	3,400		(1,039)		2,361		2.1
In-process research and development(1)	1,877		—		1,877		N/A
Indefinite-lived intangible assets
Domain name	250		—		250		N/A
Licenses	26,900		—		26,900		N/A
Total	$	312,009	$	(176,580)	$	135,429

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

Amortization expense of intangible assets was $21.5 million and $47.9 million for the three and six months ended June 30, 2023, respectively. Amortization expense of intangible assets was $26.4 million and $52.3 million for the three and six months ended June 30, 2022, respectively. The Company estimates that there is no significant residual value related to its amortizing intangible assets.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

During the six months ended June 30, 2023, the Company recorded impairment charges of $0.5 million, related to its intangible assets, excluding crypto assets held. The Company did not record any impairment charges related to its intangible assets, excluding crypto assets held, during the three months ended June 30, 2023. 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. Impairment expense is included in other operating expense (income), net in the condensed consolidated statements of operations.

The expected future amortization expense for amortizing intangible assets other than IPR&D as of June 30, 2023 is as follows (in thousands):


2023 (for the remainder of)	$	21,396
2024	24,216
2025	15,966
2026	7,665
2027	3,026
Thereafter	3,315
Total expected future amortization expense	$	75,584

Crypto assets held

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


	June 30,		December 31,
	2023		2022
Recorded at impaired cost
Crypto assets held as investments	$	321,525	$	155,251
Crypto assets held for operating purposes	78,432		67,577
Total crypto assets held recorded at impaired cost	399,957		222,828
Recorded at fair value(1)
Crypto assets held as investments	—		133,416
Crypto assets borrowed	85,390		68,149
Total crypto assets held recorded at fair value	85,390		201,565
Total crypto assets held	$	485,347	$	424,393

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

The Company recorded gross impairment charges of $25.4 million and $54.3 million during the three and six months ended June 30, 2023, respectively, due to the observed market price of crypto assets decreasing below the carrying value during the respective periods. 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 respective periods. The Company partially recovered impairments recorded during the respective periods through subsequent crypto asset sales and disposals. Impairment expense is included in other operating expense (income), net in the condensed consolidated statements of operations.

See Note 13. Derivatives, for additional details regarding crypto assets held designated as hedged items in fair value hedges. See Note 14. 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)

When the Company borrows crypto assets, it may be required to pledge collateral to maintain a required collateral percentage. See Note 11. Collateral for additional details regarding assets pledged as collateral.

8. CUSTOMER ASSETS AND LIABILITIES

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


	June 30,		December 31,
	2023		2022
Customer custodial funds	$	3,848,078	$	5,041,119
Customer crypto assets	124,243,587		75,413,188
Total customer assets	$	128,091,665	$	80,454,307

Customer custodial cash liabilities	$	3,848,078	$	4,829,587
Customer crypto liabilities	124,243,587		75,413,188
Total customer liabilities	$	128,091,665	$	80,242,775

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 the Company’s platform as well as the full or a portion of private keys including backup keys, which are maintained on behalf of customers. For crypto assets where the Company does not maintain a private key or the ability to recover a customer’s private key or their crypto assets, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121. The Company records the 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 and strategically storing custodied assets offline using the Company’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, 2023 and year ended December 31, 2022, no losses have been incurred in connection with customer crypto assets.

As of June 30, 2023 and December 31, 2022, customer crypto assets and customer crypto liabilities safeguarded for related parties were $5.2 billion and $3.5 billion, respectively. As of June 30, 2023 and December 31, 2022, customer custodial cash liabilities due to related party customers were $11.5 million and $14.2 million, respectively.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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


	June 30, 2023				December 31, 2022
	Fair Value		Percentage of Total(1)		Fair Value		Percentage of Total(1)
Bitcoin	$	60.7	48.9	%	$	32.5	43.1	%
Ethereum(2)	33.5		27.0	%	20.8		27.6	%
USDC	1.5		1.2	%	1.1		1.4	%
Other crypto assets	28.5		22.9	%	21.0		27.9	%
Total customer crypto assets	$	124.2	100.0	%	$	75.4	100.0	%

(1)As of June 30, 2023 and December 31, 2022, no assets other than Bitcoin and Ethereum individually represented more than 5% of total customer crypto assets.

(2)As of June 30, 2023 and December 31, 2022, Ethereum included $7.0 billion and $3.0 billion, respectively, of staked Ethereum.

See Note 14. 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,
	2023		2022
Prepaid expenses and other current assets
Prepaid expenses	$	80,725	$	98,204




Assets pledged as collateral(1)	79,409		100,007


Other	15,265		18,837
Total prepaid expenses and other current assets	$	175,399	$	217,048

Other non-current assets

Strategic investments	$	304,786	$	326,683
Deferred tax assets	1,127,318		1,046,791
Deposits	11,523		10,989

Other	7,570		17,257
Total other non-current assets	$	1,451,197	$	1,401,720

(1) See Note 11. Collateral for additional details on assets pledged as collateral.

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,
		2023		2022
Carrying amount, beginning of period		$	315,285	$	352,431
Net additions(1)		4,202		47,208
Upward adjustments		62		879
Previously held interest in ORDAM (see Note 4)		(20,000)		—
Impairments and downward adjustments		(7,771)		(69,054)

Carrying amount, end of period(2)		$	291,778	$	331,464

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

(2)Excludes $13.0 million and $19.4 million as of June 30, 2023 and 2022, 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 (income) expense, net in the condensed consolidated statements of operations. As of June 30, 2023, cumulative upward adjustments were $4.9 million and cumulative impairments and downward adjustments were $109.6 million. As of December 31, 2022, cumulative upward adjustments and cumulative impairments and downward adjustments were $4.9 million and $102.0 million, respectively.

During the six months ended June 30, 2023 and 2022, the Company invested an aggregate of $1.9 million and $3.9 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,
	2023		2022
Accrued expenses	$	80,484	$	75,532

Accrued payroll and payroll related	113,357		90,257
Income taxes payable	2,840		5,534
Short-term borrowings	—		20,519
Obligation to return collateral(1)	1,403		26,874
Other payables(2)	64,167		112,520
Total accrued expenses and other current liabilities	$	262,251	$	331,236

(1)See Note 11. Collateral for additional details on obligation to return collateral.

(2)Includes other payables denominated in crypto assets of $15.4 million and $8.8 million as of June 30, 2023 and December 31, 2022, respectively. See Note 13. Derivatives for additional details.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Short-term borrowings

Short-term borrowings include borrowings with open terms or amounts payable within the next 12 months or sooner at the option of the Company or the lender. The weighted average interest rate on these borrowings was 4.49% per annum as of December 31, 2022. There were no short-term borrowings outstanding as of June 30, 2023. During the six months ended June 30, 2023, the Company repaid an aggregate of $52.1 million of short-term borrowings.

11. COLLATERAL

The following is a summary of the Company’s collateral positions:


Type of Collateral	Description of Collateral	Location on Balance Sheets
Assets pledged as collateral	The Company enters into fiat and crypto asset borrowing arrangements with certain institutional customers that require the Company to post collateral in the form of fiat or crypto assets, including stablecoins, in which the lender may have the right to sell, repledge or rehypothecate such collateral without the Company’s consent. The Company also enters into certain derivative contracts which requires the Company to post collateral in the form of fiat. The Company is required to maintain a collateral to loan ratio per the borrowing arrangements, and in the event that crypto asset prices rise, the Company will have to post additional collateral to maintain required collateral ratios. If the lender has the right to use the collateral or if the collateral is fiat, the Company presents the collateral pledged as a right to receive the collateral. The lender is not obligated to return the collateral if the Company defaults on its borrowings. The Company has not defaulted on any of its borrowings.	Prepaid expenses and other current assets
Obligation to return collateral	For loans receivable and crypto asset loans receivable, the Company requires borrowers to post collateral for which it then has an obligation to return the collateral to the borrower. As of June 30, 2023, the collateral requirements ranged from 130% to 250% of the fair value of the loan, and the borrower is required to pledge additional assets to maintain their required collateral percentage. The collateral pledged by borrowers is held on the Company’s platform and the Company may have the right to use the collateral. For loans receivable, the Company does not record collateral received unless the Company has both a right to use the collateral and has sold the collateral. For crypto asset loans receivable, if the Company has the right to use collateral denominated in USDC or crypto assets, or if the collateral is fiat, the Company records the collateral as an asset with a corresponding obligation to return collateral. The Company is not obligated to return the collateral if the borrower defaults.	Accrued expenses and other current liabilities
Off-balance sheet collateral arrangements	The Company may post collateral with lenders which are not recognized as assets pledged as collateral as they do not meet the derecognition criteria. This collateral continues to be shown on the Company’s balance sheets in its original line item. The Company had $27.7 million and $— million of such collateral posted as of June 30, 2023 and December 31, 2022, respectively. The balance as of June 30, 2023 was composed of only USDC. The Company may receive non-cash collateral from borrowers where the Company does not have a right to use the collateral and does not recognize it on its balance sheets since the collateral does not meet the recognition criteria. The Company had $63.8 million and $4.8 million of such collateral received as of June 30, 2023 and December 31, 2022, respectively.	Collateral posted: Original line item Collateral received: Not recognized on balance sheet

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2023 and December 31, 2022, the Company’s assets pledged as collateral and obligation to return collateral consisted of the following (in thousands, except units):


	June 30, 2023
	Units	Fair Value
Assets pledged as collateral
USDC(1)	54,493,037	$	54,493
Bitcoin(2)	815	24,831
Fiat	N/A	85
Total		$	79,409

Obligation to return collateral
Fiat	N/A	$	1,403
Total		$	1,403


	December 31, 2022
	Units	Fair Value
Assets pledged as collateral
USDC(1)	47,633,897	$	47,634
Bitcoin(2)	650	10,743
Fiat	N/A	41,630
Total		$	100,007

Obligation to return collateral
USDC	26,873,830	$	26,874
Total		$	26,874

(1) As of June 30, 2023 and December 31, 2022, the Company had pledged USDC that served exclusively as collateral for certain crypto asset borrowings with a fair value of at least 100% of the loan amount outstanding.

(2) As of June 30, 2023 and December 31, 2022, the Company had pledged Bitcoin that served exclusively as collateral for fiat loans with a fair value of at least 100% and 110%, respectively, of the loan amount outstanding.

12. INDEBTEDNESS

The components of indebtedness were as follows as of June 30, 2023 (in thousands, except percentages):



Indebtedness	Effective Interest Rate		Principal Amount		Unamortized Debt Discount and Issuance Costs		Net Carrying Amount
0.50% 2026 Convertible Notes due on June 1, 2026	0.98	%	$	1,373,013	$	(19,756)	$	1,353,257
3.38% 2028 Senior Notes due on October 1, 2028	3.57	%	1,000,000		(9,025)		990,975
3.63% 2031 Senior Notes due on October 1, 2031	3.77	%	1,000,000		(9,975)		990,025
Total			$	3,373,013	$	(38,756)	$	3,334,257

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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



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

Convertible senior notes

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

In June 2023, the Company paid $45.5 million to repurchase $64.5 million of aggregate principal amount of the 2026 Convertible Notes with a carrying value of $63.6 million, net of unamortized issuance costs and original issue discount of $0.9 million and legal fees of $0.3 million. The Company recorded a net gain on extinguishment of long-term debt during the three and six months ended June 30, 2023 of $17.9 million in other expense (income), net within the condensed consolidated statements of operations.

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, 2023.

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,
	2023		2022		2023		2022
Coupon interest	$	19,289	$	19,234	$	38,585	$	38,641
Amortization of debt discount and issuance costs	2,238		2,168		4,403		4,238
Total	$	21,527	$	21,402	$	42,988	$	42,879

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

13. 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 Sheets
Crypto asset borrowings(1)	The Company borrowed crypto assets that resulted in the obligation to deliver a fixed amount of crypto assets in the future.	Crypto asset borrowings
Accounts and loans receivable denominated in crypto assets	Accounts receivable denominated in crypto assets: The Company provided services for which, under the contract, the customer pays in crypto assets. The amount of crypto assets are fixed at the time of invoicing. Crypto asset loans receivable: The Company lends crypto assets to institutions. The amount of crypto assets are fixed at the time of loan origination. In both of the above cases, 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 entered into arrangements that result in the obligation to deliver a fixed amount of crypto assets in the future.	Accrued expenses and other current liabilities
Crypto asset futures(1)	The Company entered into short positions on futures contracts to minimize the exposure on the change in the fair value price of crypto assets held.	Accounts and loans receivable, net of allowance
Crypto assets pledged as collateral	The Company enters into certain borrowing arrangements that require the Company to post collateral in the form of crypto assets. If the lender has the right to use the crypto asset collateral, the Company presents the collateral pledged as a right to receive a fixed amount of crypto assets.	Prepaid expenses and other current assets

(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.

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,
	2023		2022
Designated as hedging instrument
Crypto asset borrowings with embedded derivatives	$	119,478	$	80,999
Crypto asset futures(1)	—		136,230
Not designated as hedging instrument
Crypto asset borrowings with embedded derivatives	—		70,462
Accounts and loans receivable denominated in crypto assets	30,033		101,598
Other payables denominated in crypto assets	16,553		4,267
Crypto asset futures(1)	187		12,462

Crypto assets pledged as collateral	23,082		13,103
Other	1,050		—

(1) Derivative transactions are measured in terms of the notional amount; however, this amount is not recorded on the condensed consolidated balance sheets and is not, when viewed in isolation, a meaningful measure of the risk profile of the derivative instruments. The notional amount is generally not exchanged, but is used only as the underlying basis on which the value of exchange payments or settlement under these contracts are determined.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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


	Gross Derivative Assets						Gross Derivative Liabilities
June 30, 2023	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)	$	—	$	45	$	45	$	1,749	$	23,321	$	25,070
Accounts and loans receivable denominated in crypto assets	13,099		—		13,099		9		—		9
Other payables denominated in crypto assets	4,349		—		4,349		3,204		—		3,204


Crypto assets pledged as collateral	1,749		—		1,749		—		—		—
Other	1		—		1		2		—		2
Total fair value of derivative assets and liabilities	$	19,198	$	45	$	19,243	$	4,964	$	23,321	$	28,285


	Gross Derivative Assets						Gross Derivative Liabilities
December 31, 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)	$	2,266	$	—	$	2,266	$	657	$	1,653	$	2,310
Accounts and loans receivable denominated in crypto assets	302		—		302		9,146		—		9,146
Other payables denominated in crypto assets	1,270		—		1,270		5,767		—		5,767


Crypto assets pledged as collateral	—		—		—		2,360		—		2,360
Total fair value of derivative assets and liabilities	$	3,838	$	—	$	3,838	$	17,930	$	1,653	$	19,583

(1) During the six months ended June 30, 2023, the fees on these borrowings ranged from 1.5% to 5.0%. During the six months ended June 30, 2022, the fees on these borrowings ranged from 0.0% to 7.5%. During the three and six months ended June 30, 2023, the Company incurred $1.2 million and $2.7 million of borrowing fees in crypto assets, respectively. During the three and six months ended June 30, 2022, the Company incurred $1.6 million and $3.0 million of borrowing fees in crypto assets, respectively. Borrowing fees are included in other operating expense (income), net in the condensed consolidated statements of operations.

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 other operating expense (income), net, in the Company’s condensed consolidated statements of operations were as follows (in thousands):


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
	Derivatives		Hedged Items		Income Statement Impact		Derivatives		Hedged Items		Income Statement Impact
Designated as fair value hedging instruments
Crypto asset borrowings with embedded derivatives	$	3,159	$	333	$	3,492	$	355,071	$	(356,416)	$	(1,345)
Crypto asset futures	5		—		5		15,678		(15,005)		673
Not designated as hedging instruments
Crypto asset borrowings with embedded derivatives	196		—		196		6,626		—		6,626
Accounts and loans receivable denominated in crypto assets	4,156		—		4,156		(5,350)		—		(5,350)
Other payables denominated in crypto assets	405		—		405		2,510		—		2,510
Crypto asset futures	455		—		455		1,181		—		1,181

Crypto assets pledged as collateral	(196)		—		(196)		—		—		—
Other	(443)		—		(443)		—		—		—
Total	$	7,737	$	333	$	8,070	$	375,716	$	(371,421)	$	4,295



	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
	Derivatives		Hedged Items		Income Statement Impact		Derivatives		Hedged Items		Income Statement Impact
Designated as fair value hedging instruments
Crypto asset borrowings with embedded derivatives	$	(88,555)	$	48,933	$	(39,622)	$	360,069	$	(361,340)	$	(1,271)
Crypto asset futures	(43,111)		48,491		5,380		13,012		(12,262)		750
Not designated as hedging instruments
Crypto asset borrowings with embedded derivatives	196		—		196		6,626		—		6,626
Accounts and loans receivable denominated in crypto assets	47,080		—		47,080		(10,263)		—		(10,263)
Other payables denominated in crypto assets	844		—		844		2,510		—		2,510
Crypto asset futures	402		—		402		(511)		—		(511)

Crypto assets pledged as collateral	(196)		—		(196)		—		—		—
Other	(603)		—		(603)		—		—		—
Total	$	(83,943)	$	97,424	$	13,481	$	371,443	$	(373,602)	$	(2,159)

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

The following amounts were recorded on 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 (income) expense, net (in thousands):


			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
June 30, 2023	Carrying Amount of the Hedged Items		Active Hedging Relationships		Discontinued Hedging Relationships		Total


Crypto assets held	$	85,390	$	(27,214)	$	19,688	$	(7,526)


			Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
December 31, 2022	Carrying Amount of the Hedged Items		Active Hedging Relationships		Discontinued Hedging Relationships		Total
Crypto assets held	$	201,565	$	(562)	$	670	$	108

14. 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, 2023
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(1)	$	3,820,235	$	—	$	—	$	3,820,235
Customer custodial funds(2)	2,192,012		—		—		2,192,012
Crypto assets held(3)	85,390		—		—		85,390
Derivative assets(4)	—		19,243		—		19,243
Crypto asset loans receivable(5)	—		37,694		—		37,694
Customer crypto assets	—		124,243,587		—		124,243,587
Total assets	$	6,097,637	$	124,300,524	$	—	$	130,398,161

Liabilities

Derivative liabilities(4)	$	—	$	28,285	$	—	$	28,285
Contingent consideration arrangement	—		—		1,593		1,593
Customer crypto liabilities	—		124,243,587		—		124,243,587
Total liabilities	$	—	$	124,271,872	$	1,593	$	124,273,465

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents(1)	$	2,250,065	$	—	$	—	$	2,250,065
Customer custodial funds(2)	2,088,132		—		—		2,088,132
Crypto assets held(3)	201,565		—		—		201,565
Derivative assets(4)	—		3,838		—		3,838
Crypto asset loans receivable(5)	—		85,826		—		85,826
Customer crypto assets	—		75,413,188		—		75,413,188
Total assets	$	4,539,762	$	75,502,852	$	—	$	80,042,614

Liabilities
Derivative liabilities(4)	$	—	$	19,583	$	—	$	19,583
Contingent consideration arrangement	—		—		1,855		1,855
Customer crypto liabilities	—		75,413,188		—		75,413,188
Total liabilities	$	—	$	75,432,771	$	1,855	$	75,434,626

(1)Represents money market funds. Excludes $1.2 billion of corporate cash held in deposit at banks and $180.5 million held at venues, which were not measured and recorded at fair value as of June 30, 2023. Excludes $2.0 billion of corporate cash held in deposit at banks and $143.2 million held at venues, which were not measured and recorded at fair value as of December 31, 2022.

(2)Represents money market funds. Excludes customer custodial funds of $1.7 billion and $3.0 billion held in deposit at financial institutions and not measured and recorded at fair value as of June 30, 2023 and December 31, 2022, respectively.

(3)Includes crypto assets held that have been designated as hedged items in fair value hedges and excludes crypto assets of $400.0 million and $222.8 million held at cost as of June 30, 2023 and December 31, 2022, respectively.

(4)See Note 13. Derivatives for additional details.

(5)Includes the embedded derivative asset of $13.0 million and $0.3 million and embedded derivative liability of $0 and $6.0 million related to the Company's crypto asset loans receivable as of June 30, 2023 and December 31, 2022, respectively. See Note 13. Derivatives for additional details.

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, 2023 and the year ended December 31, 2022.

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 predominantly on Level 3 inputs. The carrying value of the Company’s strategic investments is predominantly adjusted based on an Option-Pricing Model that uses publicly available market data of comparable companies and other unobservable inputs including expected volatility, expected time to liquidity, adjustments for other company-specific developments, and the rights and obligations of the securities the Company holds. Fair value of crypto assets held are predominantly based on Level 1 inputs.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Assets and liabilities not measured and recorded at fair value

The Company’s financial instruments, including certain cash and cash equivalents, restricted cash, certain customer custodial funds, USDC, 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.

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, 2023, the estimated fair value of the 2026 Convertible Notes and Senior Notes were $1.0 billion and $1.2 billion, respectively.

15. COMMON STOCK

Effective April 1, 2021, the Company filed the Restated Certificate of Incorporation, amending and restating 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,
	2023	2022
Class A common stock

Options issued and outstanding under the 2013 Amended and Restated Stock Plan (the “2013 Plan”)	930	982

Options issued and outstanding under the 2019 Equity Incentive Plan (the “2019 Plan”)	24,006	25,314
RSUs issued and outstanding under the 2019 Plan	1,371	2,418

Options issued and outstanding under the 2021 Equity Incentive Plan (the “2021 Plan”)	1,622	862
RSUs and Performance Restricted Stock Units (the "PRSUs") issued and outstanding under the 2021 Plan	7,484	2,911
Shares available for future issuance under the 2021 Plan	47,338	42,819
Shares available for future issuance under the ESPP	9,084	6,701
Replacement options issued and outstanding from the Tagomi acquisition	1	1
Replacement options issued and outstanding from the Bison Trails acquisition	85	134
RSUs issued and outstanding from other acquisitions	99	—

Shares available for future issuance of warrants	2,296	2,296
Total Class A common stock shares reserved	94,316	84,438

Class B common stock
Options issued and outstanding under the 2013 Plan	4,050	4,502

Total Class B common stock shares reserved	4,050	4,502

16. 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, 2023	31,795	$	23.31	6.95	$	504,222
Granted	843	73.07
Exercised	(1,203)	14.12
Forfeited and cancelled	(731)	39.79
Expired	(10)	214.50
Balance at June 30, 2023	30,694	$	24.58	6.56	$	1,524,201

Exercisable at June 30, 2023	24,542	$	24.87	6.42	$	1,228,008
Vested and expected to vest at June 30, 2023	24,637	$	24.84	6.42	$	1,233,197

During the three and six months ended June 30, 2023, the Company granted stock options for the purchase of 71,991 and 842,617 shares of the Company’s Class A common stock with a weighted-average grant date fair value of $44.74 and $40.85 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, 2023, there was total unrecognized compensation cost of $104.8 million related to unvested stock options. These costs are expected to be recognized over a weighted-average period of approximately 2.4 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,
	2023		2022		2023		2022
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Expected volatility	93.7	%	67.6	%	90.5	%	56.2	%
Expected term (in years)	5.8		5.8		5.8		5.8
Risk-free interest rate	3.4	%	3.1	%	3.9	%	1.9	%

As of June 30, 2023, there were 77,213 shares of Class A common stock subject to repurchase related to stock options exercised early and not yet vested, but that are expected to vest. As of June 30, 2023, the Company recorded a liability related to these shares subject to repurchase in the amount of $1.5 million, which is included within accrued expenses and other current liabilities on the accompanying condensed consolidated balance sheets.

Chief Executive Officer performance award

During the three and six months ended June 30, 2023 and 2022, stock-based compensation expense of $1.0 million and $1.9 million, respectively, was recognized related to this award.

R**estricted stock units

RSUs include PRSUs, which are subject to either (a) a market condition or (b) the achievement of performance goals.

During the six months ended June 30, 2023, the Company granted 803,966 PRSUs to an executive officer. See President & Chief Operating Officer Performance Award below for additional details regarding the PRSUs granted.

Activity of RSUs and PRSUs 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, 2023	5,329	$	127.85
Granted	9,986	57.09
Vested	(5,211)	70.99
Forfeited and cancelled	(1,150)	124.21
Balance at June 30, 2023	8,954	$	82.50

As of June 30, 2023, there was total unrecognized compensation cost of $656.4 million related to unvested RSUs and PRSUs. These costs are expected to be recognized over a weighted-average period of approximately 1.3 years.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

President & Chief Operating Officer Performance Award

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

Up to 40% of the 2023 COO Performance Award is subject to vesting based upon achievement of certain cumulative revenue and cumulative adjusted EBITDA target values which are separately evaluated for the period commencing January 1, 2023 and ending on December 31, 2025, subject to her continued employment until February 20, 2026. Up to 60% of the 2023 COO Performance Award is subject to vesting in increments based upon a relative shareholder return target value for the three annual periods between January 1, 2023 and December 31, 2025, and the three year period between January 1, 2023 and December 31, 2025, subject to her continued employment through the applicable year end dates.

The total grant date fair value of this award was $25.1 million. The Company determined the fair value of the portion of the award subject to a market condition using a Monte Carlo Simulation Model (a binomial lattice-based valuation model). The Monte Carlo Simulation Model uses multiple input variables to determine the probability of satisfying the market condition requirements. The fair value of the award is not subject to change based on future market conditions.

The Company uses the accelerated attribution method to recognize expense for each vesting tranche over the requisite service period for the 2023 COO Performance Award. For the portion of the award subject to a market condition, compensation expense is recognized over the requisite service period regardless of whether or not the market condition is ultimately satisfied, according to the market-based fair value measured on the grant date, subject to continued service over the period.

For the portion of the award subject to financial performance conditions, the Company evaluates the cumulative revenue and the cumulative adjusted EBITDA results at each reporting date to determine which performance condition and level of achievement becomes most probable of being achieved for the three-year assessment period. Compensation expense is recognized over the requisite service period based on the result that is probable of occurring at each reporting date until the final vesting date, subject to continued service over the period.

During the three and six months ended June 30, 2023, stock-based compensation expense of $2.8 million was recognized related to this award.

Restricted common stock

As part of the Company’s acquisitions, the Company has issued shares of restricted Class A common stock. Vesting of this restricted Class A common stock is dependent on a service-based vesting condition that is generally satisfied over three years. The Company has the right to repurchase shares at par value 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, 2023	1,275	$	139.72
Granted	263	64.51
Vested	(851)	141.53
Forfeited and cancelled	(29)	171.85
Balance at June 30, 2023	658	$	105.78

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

As of June 30, 2023, there was total unrecognized compensation cost of $48.0 million related to unvested restricted Class A common stock. These costs are expected to be recognized over a weighted-average period of approximately 1.8 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-Pricing Model.

The grant date of the initial offering period was May 3, 2021, and that offering period ended on April 30, 2023. Subsequent offering periods will commence in each May and November after the start of the initial offering period. As of June 30, 2023, the Company recorded a liability of $3.3 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 on 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,
	2023		2022		2023		2022
Technology and development	$	123,469	$	261,232	$	246,165	$	517,756
Sales and marketing	14,930		19,396		29,139		34,352
General and administrative	61,373		110,868		123,328		191,529
Restructuring	—		—		84,042		—
Total	$	199,772	$	391,496	$	482,674	$	743,637

During the three and six months ended June 30, 2023, $14.9 million and $29.0 million of stock-based compensation expense was included in capitalized software, respectively. 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

17. 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, 2023 and 2022 was (23.8)% and 11.8%, respectively. The ETR of (23.8)% for the three months ended June 30, 2023 was lower than the U.S. statutory rate of 21.0% primarily due to a reduction in the estimated annual effective tax rate, non-deductible stock compensation expense and tax on non-U.S. earnings.

The Company’s ETR for the six months ended June 30, 2023 and 2022 was 27.9% and 17.7%, respectively. The ETR of 27.9% for the six months ended June 30, 2023 was higher than the U.S. statutory rate of 21.0% primarily due to a partial release of a valuation allowance on deferred tax assets associated with impairment charges, offset by non-deductible stock compensation expense and tax on non-U.S. earnings.

As of December 31, 2022, the Company had a valuation allowance of $177.2 million recorded against its deferred capital loss tax asset balance of $225.2 million. The Company’s capital loss tax asset is comprised primarily of impairment charges related to crypto assets held and strategic investments made by Coinbase Ventures. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of June 30, 2023, because crypto asset appreciation during the year provided more gains to offset losses, management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $60.1 million are realizable, resulting in a partial valuation allowance release of $60.1 million.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

18. NET LOSS PER SHARE

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Basic net loss per share:
Numerator
Net loss	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)


Net loss attributable to common stockholders, basic	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)

Denominator
Weighted-average shares of common stock used to compute net loss per share attributable to common stockholders, basic	234,614		220,988		233,060		219,240
Net loss per share attributable to common stockholders, basic	$	(0.42)	$	(4.95)	$	(0.76)	$	(6.95)

Diluted net loss per share:
Numerator
Net loss	$	(97,405)	$	(1,093,654)	$	(176,301)	$	(1,523,313)


Less: Fair value gain on contingent consideration arrangement, net of tax	(196)		(6,184)		(196)		(6,184)
Net loss attributable to common stockholders, diluted	$	(97,601)	$	(1,099,838)	$	(176,497)	$	(1,529,497)

Denominator
Weighted-average shares of common stock used to compute net loss per share attributable to common stockholders, basic	234,614		220,988		233,060		219,240







Contingent consideration	27		46		27		46
Weighted-average shares of common stock used to compute net loss per share attributable to common stockholders, diluted	234,641		221,034		233,087		219,286

Net loss per share attributable to common stockholders, diluted	$	(0.42)	$	(4.98)	$	(0.76)	$	(6.97)

Certain shares of the Company’s restricted Class A common stock granted as consideration in acquisitions 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.

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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,
	2023	2022	2023	2022
Stock options	30,694	34,407	30,694	34,407
RSUs	8,954	8,330	8,954	8,330
Convertible notes	3,706	3,880	3,706	3,880
Restricted common stock	985	1,998	985	1,998
ESPP	988	1,596	988	1,596

Total	45,327	50,211	45,327	50,211

19. 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 plaintiff seeks, among other relief, unspecified compensatory damages, attorneys’ fees, and costs. The Company disputes the claims in these cases and is vigorously defending against them. Based on the preliminary nature of the proceedings in these cases, the outcome of these matters remain uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time. The Company has subsequently received, and expects to receive in the future, similar shareholder claims.

In October 2021, a purported class action captioned Underwood et al. v. Coinbase Global, Inc., was filed in the U.S. District Court for the Southern District of New York against the Company alleging claims under Sections 5, 15(a)(1) and 29(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and violations of certain California and Florida state statutes. On March 11, 2022, plaintiffs filed an amended complaint adding Coinbase, Inc. and Brian Armstrong as defendants and adding causes of action. Among other relief requested, the plaintiffs sought injunctive relief, unspecified damages, attorneys’ fees and costs. On February 1, 2023, the court dismissed all federal claims (with prejudice) and state law claims (without prejudice) against Coinbase Global, Inc., Coinbase, Inc. and Brian Armstrong. Subsequently, on February 9, 2023, the plaintiffs appealed that ruling to the U.S. Court of Appeals for the Second Circuit and filed their opening brief on May 25, 2023. The filing deadline for the defendants’ opposition brief is August 23, 2023. The defendants continue to dispute the claims in this case and intend to vigorously defend against them. Based on the nature of the proceedings in this case, the outcome of this matter remains uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time.

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

During 2022, the Company’s subsidiary, Coinbase, Inc., which holds a BitLicense from the New York Department of Financial Services (“NYDFS”) and is therefore subject to examinations and investigations by the NYDFS, was subject to an investigation by the NYDFS relating to its compliance program including compliance with the Bank Secrecy Act and sanctions laws, cybersecurity, and customer support. In January 2023, the NYDFS announced a consent order focused on historical shortcomings in Coinbase, Inc.'s compliance program. Pursuant to the consent order, Coinbase, Inc. paid a $50.0 million penalty in January 2023 and agreed to invest an additional $50.0 million in its compliance function by the end of 2024.

In June 2023, the SEC filed a complaint in the U.S. District Court for the Southern District of New York against the Company and Coinbase, Inc. alleging that Coinbase, Inc. has acted as an unregistered securities exchange, broker, and clearing agency in violation of Sections 5, 15(a) and 17A(b) of the Exchange Act and that, through its staking program, Coinbase, Inc. has offered and sold securities without registering its offers and sales in violation of Sections 5(a) and 5(c) of the Securities Act. The SEC has also alleged that the Company is liable for the alleged violations as an alleged control person of Coinbase, Inc. The case is captioned SEC v. Coinbase, Inc. et al. The SEC seeks, among other relief, injunctive relief, disgorgement and civil money penalties. The Company and Coinbase, Inc. filed an answer to the SEC complaint in June 2023, dispute the claims in this case, and intend to vigorously defend against them.

Based on the preliminary nature of the proceedings in this case, the outcome of this matter remains uncertain and the Company cannot estimate the potential impact, if any, on its business or financial statements at this time. An adverse resolution of the SEC’s lawsuit could have a material impact on the Company’s business and financial statements.

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

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

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

Coinbase Global, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

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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