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What changed in Coinbase's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Coinbase's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+768 added−696 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-21)

Top changes in Coinbase's 2023 10-K

768 paragraphs added · 696 removed · 490 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+48 added−42 removed40 unchanged
Biggest changeThroughout this Annual Report on Form 10-K, we will refer to platform or platforms as our full suite of products and offerings. 7 Table of Contents To support our customers’ needs, our goal is to expand access to a growing breadth and depth of crypto assets and fiat payment rails to our customers and expand access to more product experiences – both proprietary and third party, largely decentralized applications (Dapps).
Biggest changeOur product offerings primarily include trading products that generate transaction revenue as well as a variety of ecosystem products, many of which generate subscription and services revenue. We describe these products below. Throughout this Annual Report on Form 10-K, we will refer to our full suite of products and offerings as our platform or platforms.
Escheatment and unclaimed property regulations We are subject to unclaimed property laws in the United States and in other jurisdictions where we operate. These laws require us to turn over to certain government authorities the property of others held by us that has been unclaimed for a specified period of time, including airdropped tokens and forked crypto assets.
Escheatment and unclaimed property regulations We are subject to unclaimed property laws in the United States and in certain other jurisdictions where we operate. These laws require us to turn over to certain government authorities the property of others held by us that has been unclaimed for a specified period of time, including airdropped tokens and forked crypto assets.
We rely upon a variety of protections, including combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, and contractual commitments. We co-founded the Crypto Open Patent Alliance, and pledged to only use our crypto technology patents defensively.
We rely upon a variety of protections, including a combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, and contractual commitments. We co-founded the Crypto Open Patent Alliance, and pledged to only use our crypto technology patents defensively.
Noncompliance with these rules could result in fines or penalties levied by the card association or payment network for certain acts or omissions, or the termination of our ability to offer prepaid cards. Association and network rules The bylaws and agreements between clearing house participants and bankcard companies impose specific responsibilities and liabilities for issuers of debit cards.
Noncompliance with these rules could result in fines or penalties levied by the card association or payment network for certain acts or omissions, or the termination of our ability to offer prepaid cards. 19 Association and network rules The bylaws and agreements between clearing house participants and bankcard companies impose specific responsibilities and liabilities for issuers of debit cards.
We invest in user research, design, and experience to continuously improve the ability of our products to address our users’ needs. Additionally, we have continued to invest in the trust foundations of our business. We have built and expanded the use of advanced cryptographic techniques such as multi-party computation (MPC), an innovative approach to securing user funds, within the business.
We invest in user research, design, and experience to continuously improve the ability of our products to address our users’ needs. Additionally, we have continued to invest in the trust foundations of our business. We have built and expanded the use of advanced cryptographic techniques such as multi-party computation, an innovative approach to securing user funds, within the business.
We have also made meaningful investments in learning and development, including offering an annual learning stipend and in-house crypto learning curriculum. We continuously improve our people programs and practices. We regularly monitor engagement through quarterly pulse surveys to continuously optimize our culture, employee engagement, risk management, and productivity.
We 14 have also made meaningful investments in learning and development, including offering an annual learning stipend and in-house crypto learning curriculum. We continuously improve our people programs and practices. We regularly monitor engagement through quarterly pulse surveys to continuously optimize our culture, employee engagement, risk management, and productivity.
Globally, we are subject to increasingly strict legal and regulatory requirements relating to the detection and prevention of countering terrorist financing, anti-money laundering, fraud, tax evasion, and other illicit activity, the regulation of competition, economic and trade sanctions, privacy, cybersecurity, information security, and data protection.
Globally, we are subject to strict legal and regulatory requirements relating to the detection and prevention of countering terrorist financing, anti-money laundering, fraud, tax evasion, and other illicit activity, the regulation of competition, economic and trade sanctions, privacy, cybersecurity, information security, and data protection.
In January 2014, Coinbase Global, Inc. was incorporated as a Delaware corporation to act as the holding company of Coinbase, Inc. and our other subsidiaries. In April 2014, we completed a corporate reorganization whereby Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. Coinbase Global, Inc.’s principal assets are the equity interests of Coinbase, Inc.
In January 2014, Coinbase Global, Inc. was incorporated as a Delaware corporation to act as the holding company of Coinbase, Inc. and our other subsidiaries. In April 2014, we completed a corporate reorganization whereby Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. Coinbase Global, Inc.’s principal assets are its interests in the equity of Coinbase, Inc.
The digital asset support committee reviews the relevant aspects of any asset escalated to it in connection with a listing on our trading platform in accordance with our digital asset support policies and procedures that are designed to mitigate conflicts.
The digital asset support committee reviews the relevant aspects of any asset escalated to it in connection with a listing on our platform in accordance with our digital asset support policies and procedures that are designed to mitigate conflicts.
Prohibitions on bribery and anti-corruption We are subject to regulations imposed by the FCPA in the United States and similar laws in other countries, such as the Bribery Act 2010 in the United Kingdom, or the Bribery Act, which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
Prohibitions on bribery and anti-corruption We are subject to regulations imposed by the FCPA in the United States and similar laws in other countries, such as the Bribery Act 2010 in the United Kingdom (the “Bribery Act”), which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business.
We use our website, blog, press releases, public conference calls, public webcasts, our Twitter feed (@coinbase), Facebook page, LinkedIn page, YouTube channel, and Brian Armstrong’s Twitter feed (@brian_armstrong) as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The information disclosed by the foregoing channels could be deemed to be material information.
We use our website, blog, press releases, public conference calls, public webcasts, our X feed (@coinbase), Facebook page, LinkedIn page, YouTube channel, and Brian Armstrong’s X feed (@brian_armstrong) as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The information disclosed by the foregoing channels could be deemed to be material information.
The CFPB has enforcement authority to prevent an entity that offers or provides consumer financial services or products or a service provider in the United States from committing or engaging in UDAAPs or violating other federal consumer financial laws such as Regulation E, including the ability to engage in joint investigations with other agencies, issue subpoenas and civil investigative demands, conduct hearings and adjudication proceedings, commence a civil action, grant relief (e.g., limit activities or functions; rescission of contracts), and refer matters for criminal proceedings.
The CFPB has enforcement 18 authority to prevent an entity that offers or provides consumer financial services or products or a service provider in the United States from committing or engaging in UDAAPs or violating other federal consumer financial laws, including the ability to engage in joint investigations with other agencies, issue subpoenas and civil investigative demands, conduct hearings and adjudication proceedings, commence a civil action, grant relief (e.g., limit activities or functions; rescission of contracts), and refer matters for criminal proceedings.
In parallel, we remain highly engaged with global regulatory bodies and governmental agencies. Our ability to quickly and continuously innovate to support additional blockchains, provide products and services to our customers that are native to the crypto economy, such as staking and governance, and launch additional products and services further separates us from our competition.
In parallel, we remain highly engaged with global regulatory bodies and governmental agencies. Our ability to quickly and continuously innovate to support additional blockchains, provide products and services to our customers that are native to the cryptoeconomy, such as staking and governance, and launch additional products and services further separates us from our competition.
Also, when users stake their assets through Coinbase, the rewards they earn for helping to secure the network are directly tied to the rewards returned by on-chain network protocols and marketplaces, which Coinbase passes through minus a disclosed fee. Coinbase does not unilaterally determine what reward to pay or whether to pay a reward.
Also, when users stake their assets through Coinbase, the rewards they earn for helping to secure the network are directly tied to the rewards returned by onchain network protocols and marketplaces, which Coinbase passes through minus a disclosed fee. Coinbase does not unilaterally determine what reward to pay or whether to pay a reward.
Moreover, our various user, custody and client agreements clarify the applicability of Uniform Commercial Code (“UCC”) Article 8 to custodied crypto assets. UCC Article 8 provides that financial assets held by Coinbase are not property of Coinbase and not subject to claims of our general creditors.
Moreover, our various user, custody, and client agreements clarify the applicability of Uniform Commercial Code (“UCC”) Article 8 to custodied crypto assets. UCC Article 8 provides that financial assets held by Coinbase for its customers are not property of Coinbase and not subject to claims of our general creditors.
For example, in the European Union, the Multilateral Interchange Fee Regulation caps interchange fees for credit and debit card payments and provides for business rules to be complied with by any company dealing with card transactions, including us. As a result, the fees that we collect in certain jurisdictions may become the subject of regulatory challenge.
For example, in the E.U., the Multilateral Interchange Fee Regulation caps interchange fees for credit and debit card payments and provides for business rules to be complied with by any company dealing with card transactions, including us. As a result, the fees that we collect in certain jurisdictions may become the subject of regulatory challenge.
As a licensed money transmitter and an entity subject to the BitLicense regulatory regime, we are subject to, among other things, the BSA, restrictions and requirements with respect to the investment of customer funds and use and safeguarding of customer funds and crypto assets, and bonding, capital requirements including our aggregate net worth, prudential compliance obligations associated with customer notice and disclosure, reporting and recordkeeping requirements applicable to the company, as well as control persons and inspection and examination by state regulatory agencies.
As a licensed money transmitter and an entity subject to the BitLicense regulatory regime, we are subject to, among other things, the BSA, restrictions and requirements with respect to the investment of customer funds and use and safeguarding of customer funds and crypto assets, and bonding, minimum capital and net worth requirements, prudential compliance obligations associated with customer notice and disclosure, reporting and recordkeeping requirements applicable to the company, as well as requirements relating to the screening of control persons and inspection and examination by state regulatory agencies.
Coinbase Cloud offers crypto payment or trading APIs, data access, and staking infrastructure. These tools allow companies to build crypto products faster and to simplify how they interact with blockchains. Coinbase Pay and Coinbase Commerce allow developers and merchants to more easily integrate crypto transactions into their products and businesses.
Coinbase Cloud offers crypto payment or trading APIs, data access, and staking infrastructure, which allow developers to build crypto products faster and to simplify how they interact with blockchains. Coinbase Pay and Coinbase Commerce allow developers and merchants to more easily integrate crypto transactions into their products and businesses.
Economic and trade sanctions We are required to comply with economic and trade sanctions administered by the United States, the European Union, or E.U., relevant E.U. member states, and other jurisdictions in which we operate.
Economic and trade sanctions We are required to comply with economic and trade sanctions administered by the United States, the European Union (“E.U.”), relevant E.U. member states, and other jurisdictions in which we operate.
Our lending activities are also subject to various state lending laws and licensure requirements with respect to lending activities within such state. These state lending laws may be enforced by state attorneys general, state financial regulators, and private litigants, among others.
As a result, our lending activities are subject to various state lending laws and licensure requirements with respect to lending activities within such state. These state lending laws may be enforced by state attorneys general, state financial regulators, and private litigants, among others.
We have had no material direct impact to our business, financial condition, customers or counterparties from the 2022 Events; however, the 2022 Events did cause a change to crypto market prices, crypto market volatility and customer sentiment, and each of these drivers do indirectly impact our business and our revenue potential.
We have had no material direct impact to our business, financial condition, customers, or counterparties from the 2022 Events; however, the 2022 Events caused a change to crypto market prices, crypto market volatility, and customer sentiment, and each of these drivers indirectly impacted our business and our revenue potential.
Given our novel business model and uncertainty regarding application of some of these laws and regulations, particularly laws prohibiting UDAAPs, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements. 18 Table of Contents Interchange fees Interchange fees associated with four-party payments systems are being reviewed or challenged in various jurisdictions.
Given our novel business model and uncertainty regarding application of some of these laws and regulations, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements. Interchange fees Interchange fees associated with four-party payments systems are being reviewed or challenged in various jurisdictions.
Our culture has and will evolve but, at our core, we prioritize the following principles: • Clear communication • Efficient execution • Act like an owner • Top talent • Championship team • Continuous learning • Customer focus • Repeatable innovation • Positive energy • Mission first 13 Table of Contents We are a remote-first company.
Our culture has and will continue to evolve but, at our core, we prioritize the following principles: • Clear communication • Efficient execution • Act like an owner • Top talent • Championship team • Continuous learning • Customer focus • Repeatable innovation • Positive energy • Mission first We are a remote-first company.
For Coinbase entities that provide crypto trading services, such as Coinbase, Inc., crypto assets are held in an omnibus manner on the blockchain and separated using a ledger system.
For Coinbase entities that provide crypto trading services, such as Coinbase, Inc., 11 crypto assets are held in an omnibus manner on the blockchain and separately recorded using a ledger system.
As the issuer of the Coinbase Card, we are required to comply with the appropriate National Automated Clearing House Association, or NACHA, bylaws, operating rules, and agreements, as well as card network rules and guidelines.
As the issuer of the Coinbase Card, we are required to comply with the appropriate National Automated Clearing House Association (“ NACHA”), bylaws, operating rules, and agreements, as well as card network rules and guidelines.
We conduct an annual market review to ensure our compensation maintains in line with our competitive compensation philosophy. We have single, transparent pay targets for the vast majority of our roles - eliminating most compensation negotiations - and provide one-year equity grants for the vast majority of employees.
We conduct an annual market review to ensure our compensation continues to be consistent with our competitive compensation philosophy. We have single, transparent pay targets for the vast majority of our roles – eliminating most compensation negotiations – and provide one-year equity grants for the vast majority of employees.
Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptoeconomy, require us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that regulators may disagree with our conclusions. We are not regulated by the Office of the Comptroller of the Currency.
Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptoeconomy, require us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that regulators may disagree with our conclusions.
Trusted Crypto Platform The failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks, Voyager and Three Arrows Capital, in 2022 (the “2022 Events”) has impacted and may continue to impact the broader cryptoeconomy. The full extent of these impacts may not yet be known.
Trusted Crypto Platform The failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks, Voyager, and Three Arrows Capital, in 2022 (the “2022 Events”) has impacted and may continue to impact the broader cryptoeconomy.
Staking independently requires a participant to run their own hardware, software, and maintain close to 100% up-time. We provide a true, on-chain proof-of-stake service, which reduces the complexities of staking and allows our consumers to maintain full ownership of their crypto assets while earning staking rewards.
Today, staking crypto assets is a technical challenge for most customers. Staking independently requires a participant to run their own hardware and software and maintain close to 100% up-time. We provide a true, onchain proof-of-stake service, which reduces the complexities of staking and allows our customers to maintain full ownership of their crypto assets while earning staking rewards.
These state licensing laws also cover matters such as regulatory approval of controlling stockholders, directors, and senior management of the licensed entity. Outside the United States, we have obtained licenses to provide crypto-asset custody and trading from the German Federal Financial Supervisory Authority.
These state licensing laws also cover matters such as regulatory approval of controlling stockholders, directors, and senior management of the licensed entity. Outside the United States, we have obtained licenses to provide crypto-asset custody and trading from the German Federal Financial Supervisory Authority (BaFin). In Singapore, we hold a major payment institution license issued by the Monetary Authority of Singapore.
We offer two trading experiences within the application, a simple trading experience for consumers of any experience level and an advanced trading experience for more sophisticated traders. Simple trading refers to buying and selling cryptocurrencies using the basic interface of the app, and includes value-added services such as fixed price quotes and recurring trades.
We offer two trading experiences: (i) a simple trading experience for consumers of any experience level seeking ease of use and (ii) an advanced trading experience for more sophisticated traders. Simple trading refers to buying and selling crypto assets using the basic interface of our platform, and includes value-added services such as fixed price quotes and recurring trades.
See Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for a more comprehensive description of risks related to competition.
See the section titled “ Risk Factors ” in Part I, Item 1A of this Annual Report on Form 10-K for a more comprehensive description of risks related to competition.
We do not have any known material financial exposure to other cryptoeconomy participants that faced insolvency and liquidity issues, experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, allegedly mishandled customer funds, or experienced significant corporate compliance failures in connection with the 2022 Events. 11 Table of Contents Following the 2022 Events, one of our highest priorities is to restore confidence and interest in the cryptoeconomy and maintain and increase engagement on our platform.
We do not have any known material financial exposure to other cryptoeconomy participants that faced insolvency and liquidity issues, experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, allegedly mishandled customer funds, or experienced significant corporate compliance failures in connection with the 2022 Events.
Our compliance program includes policies, procedures, reporting protocols, and internal controls, and is designed to address legal and regulatory requirements as well as to assist us in managing risks associated with money laundering and terrorist financing. Anti-money laundering regulations are constantly evolving and vary from jurisdiction-to-jurisdiction.
It includes policies, procedures, reporting protocols, and internal controls, and is designed to address legal and regulatory requirements as well as to assist us in managing risks associated with money laundering and terrorist financing.
Therefore, we monitor these areas closely and invest significant resources in our legal, compliance, product, and engineering teams to ensure our business practices evolve to help us comply with the current laws, regulations, and legal standards to which we are subject, as well as to plan and prepare for changes in interpretations thereof, as well as additional laws, regulations and legal standards that are introduced in the future. 14 Table of Contents Anti-money laundering and counter-terrorist financing We are subject to various anti-money laundering and counter-terrorist financing laws, including the Bank Secrecy Act (the “BSA”) in the United States, and similar laws and regulations abroad.
Therefore, we monitor these areas closely and invest significant resources in our legal, compliance, product, and engineering teams to ensure our business practices evolve to help us comply with the current laws, regulations, and legal standards to which we are subject, as well as to plan and prepare for changes in interpretations thereof, as well as additional laws, regulations, and legal standards that are introduced in the future.
We signal who will thrive at Coinbase by being transparent about our culture through our publicly available culture document.
We signal who will thrive at Coinbase by being transparent about our culture on our website.
We invest in these surveys and associated action planning at the executive level, as we believe our people and culture are key drivers of business success. As of December 31, 2022, we had 4,510 employees. In January 2023, we announced a reduction to our workforce by approximately 950 employees.
We invest in these surveys and associated action planning at the executive level, as we believe our people and culture are key drivers of business success. As of December 31, 2023, we had 3,416 employees.
These laws may also require us to liquidate that property prior to turning it over. We hold property subject to unclaimed property laws, and we have an ongoing program designed to help us comply with these laws. However, there is significant regulatory uncertainty with how states and foreign jurisdictions treat crypto assets under unclaimed property rules.
These laws may also require us to liquidate that property prior to turning it over. We hold property subject to unclaimed property laws; however, there is significant regulatory uncertainty with how states and certain foreign jurisdictions treat crypto assets under unclaimed property rules. Lending law We originate secured commercial loans in certain states in the United States.
For example, we take a number of steps to mitigate conflicts in our digital asset listing process. We have a digital asset support committee that is composed of senior leaders from our product, legal, compliance, finance, and accounting departments.
We have a digital asset support committee that is composed of senior leaders from our product, legal, compliance, finance, and accounting departments.
Further, we carefully handle and keep customer data confidential through security and encryption as well as policies, training and monitoring. Moreover, we invest heavily in compliance tools. For example, in addition to robust know-your-customer and anti-money laundering programs, we employ an industry leading third-party trade surveillance software platform that helps us monitor and detect problematic trading activities on our platform.
For example, in addition to robust know-your-customer and anti-money laundering programs, we employ an industry leading third-party trade surveillance software platform that helps us monitor and detect problematic trading activities on our platform, as further discussed below.
In addition to Coinbase, Inc., Coinbase Global, Inc. is the parent company of a number of other operating subsidiaries. Coinbase, the Coinbase logo, and other registered or common law trade names, trademarks, or service marks of Coinbase included in this Annual Report on Form 10-K are the property of Coinbase.
Coinbase, the Coinbase logo, and other registered or common law trade names, trademarks, or service marks of Coinbase included in this Annual Report on Form 10-K are the property of Coinbase. Other trademarks, service marks, or trade names included in this Annual Report on Form 10-K are the property of their respective owners.
Customer Assets and Liabilities to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K and Risk Factors—Our failure to safeguard and manage our and our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition and Risk Factors—Depositing and withdrawing crypto assets into and from our platform involve risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business included in Part I, Item 1A of this Annual Report on Form 10-K. 12 Table of Contents We also have policies in place to help us govern accounting controls, including customer account initiations and reconciliations, and to help prevent improper self-dealing and other conflicts of interest between us and our customers on our crypto asset trading platforms.
Customer Assets and Liabilities, of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K and Risk Factors—Our failure to safeguard and manage our and our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition and Risk Factors—Depositing and withdrawing crypto assets into and from our platform involve risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business included in Part I, Item 1A of this Annual Report on Form 10-K.
We hold our customer assets 1:1 at all times, which means we do not lend or rehypothecate customer assets, and do not act on customer assets or engage in fractional reserve banking with respect to customer assets without customer consent. For consumer and institutional users who participate in our staking program, their staked assets remain their assets.
We hold our customer assets 1:1 at all times, which means we do not lend or rehypothecate customer assets, and do not act on customer assets or engage in fractional reserve banking with respect to customer assets without customer consent. We safeguard crypto assets using proprietary technology and operational processes.
We offer trade financing whereby we advance funds and settle on behalf of credit-eligible customers, removing a key point of friction by allowing customers to instantly trade on credit and settle within a few days. We earn interest income on loans outstanding. Going forward, we may seek to provide advanced risk management services where Coinbase acts principally to facilitate transactions.
We offer trade financing whereby we lend funds to credit-eligible customers, removing a key point of friction by allowing customers to instantly trade on credit and settle within a few days. We also earn interest income on loans outstanding.
Certain blockchain protocols, such as Ethereum, rely on staking, an alternative way to validate blockchain transactions. Network participants, in this case Coinbase, can designate a certain amount of their crypto assets on the network to validate transactions and get rewarded in kind from the network. Today, staking crypto assets is a technical challenge for most consumers.
Staking One of the most popular services customers often engage with is earning rewards on their crypto assets. Certain blockchain protocols, such as Ethereum, rely on staking to validate blockchain transactions. Network participants can designate a certain amount of their crypto assets on the network to validate transactions and get rewarded in kind from the network.
Only the digital asset support committee decides which of these escalated assets we can and cannot list on our platform, and it does not coordinate such decisions with anyone outside of the committee. We also have policies and procedures that require committee members to recuse themselves from asset listing decisions where a committee member may have a conflict of interest.
Only the digital asset support committee decides which of these escalated assets we can and cannot list on our platform, and it does not 12 coordinate such decisions with anyone outside of the committee.
Our Competition The cryptoeconomy remains highly fragmented, intensely competitive, and subject to increasingly global regulatory scrutiny and oversight. We face significant competition from a variety of companies around the world – ranging from crypto native companies, including decentralized exchanges, to large traditional financial services incumbents and financial technology providers. The competitive landscape varies significantly by geography.
We face significant competition from a variety of companies around the world – ranging from crypto-native companies, including decentralized exchanges, to large traditional financial services incumbents and financial technology providers.
FCMs and DCMs are subject to numerous regulatory requirements, including strict capital requirements.
FCMs and DCMs are subject to the rules of the National Futures Association as well as numerous regulatory requirements, including strict capital requirements.
As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels. The contents of the websites referred to above are not incorporated into this filing. 20 Table of Contents
As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
We offer volume-based pricing and charge a transaction fee for every matched trade. 9 Table of Contents Underpinning Coinbase Prime is an institutional-grade custody platform with a highly secure cold storage solution made available both within the US and globally. We charge a separate fee based on the total assets stored in custody on our platform.
For example, underpinning our Coinbase Prime product is an institutional-grade custody platform with a highly secure cold storage solution made available both within the United States and globally. We charge institutions a separate fee based on the total assets stored in custody on our platform. For example, we serve as a custodian for several Bitcoin ETF issuers.
Separately, our subsidiary, Coinbase Financial Markets, Inc. has applied for registration as a futures commission merchant (“FCM”) with the National Futures Association, and in February 2022, we acquired LMX Labs, LLC, a designated contract market (“DCM”) regulated by the CFTC, in connection with our acquisition of FairXchange, Inc.
In August 2023, our subsidiary, Coinbase Financial Markets, Inc. secured regulatory approval from the National Futures Association to operate as a futures commission merchant (“FCM”), in September 2023, Coinbase International Exchange secured regulatory approval from the BMA to enable perpetual futures for eligible non-U.S. customers, and in February 2022, we acquired LMX Labs, LLC, a designated contract market (“DCM”) regulated by the CFTC which now operates as the Coinbase Derivatives Exchange, in connection with our acquisition of FairXchange, Inc.
Customers typically need to pre-fund their account and maintain fiat or crypto assets on our platform in order to participate in the 24/7/365 instant settlement crypto market.
We offer integrated financing products and services to select institutions that meet our credit criteria to access liquidity for their hedging, trading, and working capital needs. Customers typically need to pre-fund their account and maintain fiat or crypto assets on our platform in order to participate in the 24/7/365 instant settlement crypto market.
Recent market disruptions have led to numerous proposals among consumer protection focused agencies including by the FTC and CFPB for changes in the regulation of the crypto industry.
Recent market disruptions have led to numerous proposals among consumer protection focused agencies including by the FTC and CFPB for changes in the regulation of the crypto industry, and in November 2023, the CFPB proposed a rule to define a market for general-use digital consumer payment applications, which would give the CFPB supervisory authority to examine the larger participants of that market.
Our advanced trading experience offers traders access to real-time market information through interactive charts, order books, and a live trade history on the advanced trade view, and other trading tools. We offer two pricing options for our consumers who engage with our crypto trading products.
Our advanced trading experience offers traders access to real-time market information through interactive 8 charts, order books, a live trade history on the advanced trade view, and other trading tools. We generate fees from consumers trading on our platform, including through volume-based transaction fees and a spread depending on the type of trade.
Under these licenses and registrations, we are subject to a broad range of rules and regulations including in respect of AML, safeguarding of customer assets and funds, regulatory capital requirements, fit and proper management, operational controls, corporate governance, customer disclosures, reporting and record keeping. 15 Table of Contents New York State trust company Our subsidiary, Coinbase Custody Trust Company, LLC, operates as a New York State-chartered limited purpose trust company, which is subject to regulation, examination, and supervision by the NYDFS.
Under these licenses and registrations, we are subject to a broad range of rules and regulations including in respect of anti-money laundering, safeguarding of customer assets and funds, regulatory capital requirements, fit and proper management, operational controls, corporate governance, customer disclosures, reporting, and record keeping.
We monetize by charging a fee to engage in certain transactions on decentralized exchanges. Coinbase Wallet We also offer a software product, Coinbase Wallet, to consumers in over 100 markets, which allows them to engage and transact with the full universe of Dapps and crypto use cases without the need for a centralized intermediary such as Coinbase.
Coinbase Wallet We offer a self-custody software product to consumers globally, Coinbase Wallet, which allows them to engage and transact with the full universe of Dapps and crypto use cases without the need for a centralized intermediary such as Coinbase. Customers can link their Coinbase account to their Coinbase Wallet to transfer assets between the two.
We believe our safe and trusted crypto platform positions us well to achieve this, particularly because we have policies and procedures and take steps to help ensure proper safeguarding of crypto assets we hold. We hold crypto assets on behalf of customers. We also hold crypto assets for our own investment and operating purposes.
We place great importance on safeguarding crypto assets, and we have policies and procedures to help ensure the proper safeguarding of the crypto assets we hold on behalf of our customers and for our own investment and operating purposes. When customers use our platform, their assets remain their assets.
We have implemented a compliance program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other illicit activity in countries, or with persons or entities, included on designated lists promulgated by the Office of Foreign Assets Control (“OFAC”), and equivalent foreign authorities.
Our compliance program is designed to prevent and detect instances of money laundering, terrorist financing, and other illicit activity on our platform. It is also designed to prohibit the use of Coinbase in sanctioned jurisdictions, or by sanctioned persons or entities, as determined by the Office of Foreign Assets Control 15 (“OFAC”), and equivalent foreign authorities.
In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with which we have commercial relationships. 17 Table of Contents Consumer protection The Federal Trade Commission, or FTC, the Consumer Financial Protection Bureau, or CFPB, and other U.S. federal, state, and local and foreign regulatory agencies regulate financial products, including money transfer services related to remittance or peer-to-peer transfers.
In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with which we have commercial relationships.
Securities In recent years, the Securities and Exchange Commission (“SEC”) and U.S. state securities regulators have stated that certain digital assets or digital asset products may be classified as securities under U.S. federal and state securities laws - however, there has not been definitive guidance on this point.
Securities In recent years, the SEC and U.S. state securities regulators have stated that certain digital assets or digital asset products may be classified as securities under U.S. federal and state securities laws, and in the case of the SEC, has made public statements on this topic – however, these statements are not binding or definitive guidance, and there is currently no certainty under the SEC’s application of the applicable legal test as to whether particular crypto assets, products, or services would be deemed securities.
For example, the traditional financial services and financial technology companies we compete against are largely US and European based and operate under the same evolving US regulatory landscape that we do. For consumers, we compete with a range of companies that solely focus on the crypto market, as well as financial technology and brokerage firms.
The competitive landscape varies significantly by geography. For example, the traditional financial services and financial technology companies we compete against are largely U.S. and European based and operate under the same evolving regulatory landscape that we do.
Additionally, Coinbase is committed to providing a fair, transparent, and equitable experience across our suite of trading products. Crypto assets and use cases are rapidly expanding and Coinbase seeks to offer our consumers access to all assets and use cases where it is safe and legal to do so.
Crypto assets and use cases are rapidly expanding and Coinbase seeks to offer our customers access to all assets and use cases where it is safe and legal to do so. For example, we take a number of steps to mitigate conflicts in our digital asset listing process.
Trading in crypto, inclusive of discovering, buying and selling crypto assets is typically the first step in a consumer’s Coinbase experience. The Coinbase app is designed to serve a wide variety of consumers, whether they are buying their first token or are advanced traders.
Trading Products Trading is the primary source of our transaction revenue, and is driven by consumer and institutional customers. Consumer Trading Our platform is designed to serve a wide variety of consumers, whether they are buying their first crypto asset or are advanced traders.
Other trademarks, service marks, or trade names included in this Annual Report on Form 10-K are the property of their respective owners. 19 Table of Contents We are a remote-first company, meaning the majority of our employees work remotely. Due to this, we do not have a principal executive office.
In addition to Coinbase, Inc., Coinbase Global, Inc. is the parent company of a number of other operating subsidiaries. We are a remote-first company, meaning the majority of our employees work remotely. Due to this, we do not have a principal executive office.
Through Coinbase Prime, institutions have access to deep pools of liquidity across the crypto marketplace and best price execution due to our ability to route trades through a network of connected trading venues, including the Coinbase Spot Market.
We also offer a subscription product for consumers trading on our platform, which is described in more detail below. Coinbase Prime Through Coinbase Prime, our full-service prime brokerage platform, institutional customers can access deep pools of liquidity across trading venues and best price execution due to our ability to route trades through a network of connected trading venues.
In addition, our trading platform is not an SEC-regulated national securities exchange or alternative trading system.
We are not supervised by any federal banking agency, such as the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Federal Reserve Board. In addition, our trading platform is not an SEC-regulated national securities exchange or alternative trading system.
In addition, we have obtained a BitLicense from the New York State Department of Financial Services (“NYDFS”).
In addition, we have obtained a BitLicense from NYDFS.
As our business and the industry continues to grow and we expand our products and services, we will continue to update and strengthen such internal controls, policies and procedures, as well as work with our partners to do the same in order for us to remain an industry leader and a trusted platform.
As we maintain, grow, and expand our product and services offerings we also must scale and strengthen our internal controls and processes, and monitor our third-party partners’ and vendors’ ability to similarly scale and strengthen in order for us to remain an industry leader and a trusted platform.
All of our broker-dealer activities are subject to regulation, examination, investigation, and disciplinary action by the SEC, FINRA, and state securities regulators, as well as other governmental authorities and self-regulatory organizations with which they are registered or licensed or of which they are a member. 16 Table of Contents Commodities and derivatives The CFTC has stated and CFTC enforcement actions have confirmed that at least some crypto assets, including Bitcoin, fall within the definition of a “commodity” under the U.S.
We also evaluate all other products and services prior to launch under U.S. federal and applicable international securities laws. 17 Commodities and derivatives The Commodity Futures Trading Commission (“CFTC”) has stated, and CFTC enforcement actions have confirmed, that at least some crypto assets, including Bitcoin, fall within the definition of a “commodity” under the U.S.
We have established policies and procedures to mitigate conflicts of interests that may arise in these types of transactions. Markets We provide market infrastructure in the form of trading venues to trade spot via the Coinbase Spot Market and derivatives via the Coinbase Derivatives Exchange.
We offer volume-based pricing and charge a transaction fee for executed trades. Markets We provide market infrastructure in the form of trading venues for customers to trade spot and derivatives. We currently provide access to three trading venues: the Coinbase Exchange, the Coinbase International Exchange, and the Coinbase Derivatives Exchange.
Item 1. Business Coinbase Overview Our mission is to increase economic freedom in the world. We build safe, trusted, easy-to-use technology and financial infrastructure products and services that enable any person or business with an internet connection to discover, transact, and engage with crypto assets and decentralized applications.
Item 1. Business Coinbase Overview Our mission is to increase economic freedom in the world. We are working to update the century-old financial system by providing a trusted platform that makes it easy for our customers to engage with crypto assets, including trading, staking, safekeeping, spending, and fast, free global transfers. We also provide critical infrastructure for onchain activities.
The second option is through our subscription product, Coinbase One, in which consumers pay a monthly fee, in lieu of a transaction fee, until reaching a certain trading volume threshold. However, for simple trading, a spread still applies to a trade. We do not charge our consumers a separate fee to safely store their crypto assets on our platform.
Coinbase One Consumers can transact on our platform through a subscription product, Coinbase One. Consumers pay a monthly fee in lieu of a transaction fee under a certain trading threshold and access a variety of benefits, including priority support. Financing Increasingly important to institutions is the ability to have access to financing products.
For example, we have a crypto asset investment policy that allows us to invest up to 10% of our quarterly net income into a diversified portfolio of crypto assets. We execute these trades away from our crypto asset trading platform to avoid any conflict of interest with our customers.
When we make investments in crypto assets, we execute investment trades away from our platform to avoid any conflict of interest with our customers. Additionally, Coinbase is committed to providing a fair, transparent, and equitable experience across our suite of trading products.
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Our products enable customers to access and participate in the cryptoeconomy, a new open financial system built upon crypto, in more than 100 countries and serve as a critical infrastructure layer to web3, a broad category of crypto-powered technologies including self-custody wallets, decentralized apps and services, and open community engagement platforms. The cryptoeconomy and web3 remain in their early days.
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Onchain activities are interactions with the blockchain that usually take place in a broad category of blockchain-powered technologies, including self-custody wallets, decentralized apps and services, and open community engagement platforms.
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Crypto asset prices are highly volatile and cyclical. Including the current cycle, we have observed four major crypto asset price cycles since 2010. Each previous cycle has varied in duration ranging from approximately two to four years, and has increased the overall crypto market capitalization from the prior cycle.
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Our Business We offer a suite of products and services that are designed to meet the distinct needs of our three customer groups: • Consumers - individual retail user customers seeking to discover or trade crypto assets and engage in onchain activities. • Institutions - businesses that include market makers, asset managers, hedge funds, banks, wealth platforms, registered investment advisors, payment platforms, and public and private corporations. • Developers - developers, creators, merchants, crypto asset issuers, organizations and financial institutions, and other groups building decentralized protocols, applications, products, or other services onchain.
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As shown below, these cycles are visible when viewing the price of Bitcoin, the first and largest crypto asset, over time through December 31, 2022 on a logarithmic scale.
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When signing up for an account on our platform, among other requirements, consumer and institutional customers must certify that they are at least eighteen (18) years of age (if a natural person), agree to a user agreement, satisfy the requirements of our robust know-your-customer (“KYC”) program, and have read our privacy policy.
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Our Business Coinbase offers a safe, trusted, easy-to-use platform that serves as a gateway to the cryptoeconomy for our three customer groups via both custodial and self-custodial solutions: consumers, institutions, and developers.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a claim that is based upon a breach of fiduciary duty; any action asserting a claim against us or any current or former director, officer, stockholder, employee or agent of ours, arising pursuant to the DGCL, our restated certificate of incorporation, or our restated bylaws; any action asserting a claim against us that is governed by the internal affairs doctrine; or any action asserting an “internal corporate claim” as defined in Section 115 of the DGCL. 93 Table of Contents Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our restated certificate of incorporation provides that the federal district courts of the United States of America are, to the fullest extent permitted by law, the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision, unless we consent in writing to the selection of an alternative forum.
Biggest changeOur restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a claim that is based upon a breach of fiduciary duty; any action asserting a claim against us or any current or former director, officer, stockholder, employee or agent of ours, arising pursuant to the DGCL, our restated certificate of incorporation, or our restated bylaws; any action asserting a claim against us that is governed by the internal affairs doctrine; or any action asserting an “internal corporate claim” as defined in Section 115 of the DGCL.
Therefore, our operating results could fluctuate significantly as a result of changes in the demand for our subscription and service offerings, in the demand for USDC, the balance of USDC on our platform, in interest rates, and to our ongoing relationships with third parties, such as the issuer of USDC.
Therefore, our operating results could fluctuate significantly as a result of changes in the demand for our subscription and service offerings, in the demand for USDC, in the balance of USDC on our platform, in interest rates, and to our ongoing relationships with third parties, such as the issuer of USDC.
However, it is nevertheless possible that hackers, employees or service providers acting contrary to our policies, or others could circumvent these safeguards to improperly access our systems or documents, or the systems or documents of our business partners, agents, or service providers, and improperly access, obtain, misuse customer crypto assets and funds.
However, it is nevertheless possible that hackers, employees or service providers acting contrary to our policies, or others could circumvent these safeguards to improperly access our systems or documents, or the systems or documents of our business partners, agents, or service providers, and improperly access, obtain, or misuse customer crypto assets and funds.
Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, federal government contractors, trust companies, securities, derivative transactions and markets, broker-dealers and alternative trading systems (“ATS”), commodities, credit, crypto asset custody, exchange, and transfer, cross-border and domestic money and crypto asset transmission, consumer and commercial lending, usury, foreign currency exchange, privacy, data governance, data protection, cybersecurity, fraud detection, payment services (including payment processing and settlement services), consumer protection, escheatment, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.
Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, federal government contractors, trust 29 companies, securities, derivative transactions and markets, broker-dealers and alternative trading systems (“ATS”), commodities, credit, crypto asset custody, exchange, and transfer, cross-border and domestic money and crypto asset transmission, commercial lending, usury, foreign currency exchange, privacy, data governance, data protection, cybersecurity, fraud detection, payment services (including payment processing and settlement services), consumer protection, escheatment, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing.
To the extent that a crypto asset in which we facilitate or facilitated trading or transactions in a crypto asset which we facilitate or facilitated are deemed to fall within the definition of a commodity interest, including pursuant to subsequent rulemaking or guidance by the CFTC, we may be subject to additional regulatory requirements and oversight and could be subject to judicial or administrative sanctions if we do not or did not at a relevant time possess appropriate registrations as an exchange (for example, as a designated contract market for trading futures or options on futures, or as a swaps execution facility for trading swaps) or as a registered intermediary (for example, as a futures commission merchant or introducing broker).
To the extent that a crypto asset in which we facilitate or facilitated 65 trading or transactions in a crypto asset which we facilitate or facilitated are deemed to fall within the definition of a commodity interest, including pursuant to subsequent rulemaking or guidance by the CFTC, we may be subject to additional regulatory requirements and oversight and could be subject to judicial or administrative sanctions if we do not or did not at a relevant time possess appropriate registrations as an exchange (for example, as a designated contract market for trading futures or options on futures, or as a swaps execution facility for trading swaps) or as a registered intermediary (for example, as a futures commission merchant or introducing broker).
Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, severe criminal, or civil sanctions, damage our reputation, or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, and financial condition.
Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, severe criminal, or civil sanctions, 69 damage our reputation, or result in fines or proceedings by governmental agencies and private claims and litigation, any of which could adversely affect our business, operating results, and financial condition.
Due to the new and evolving nature of crypto assets and the absence of comprehensive legal and tax guidance with respect to crypto asset products and transactions, many significant aspects of the U.S. and foreign tax treatment of transactions involving crypto assets, such as the purchase and sale of crypto assets on our platform, as well as the provision of staking rewards and other crypto asset incentives and rewards products, are uncertain, and it is unclear whether, when and what guidance may be issued in the future on the treatment of crypto asset transactions for U.S. and foreign income tax purposes.
Due to the new and evolving nature of crypto assets and the absence of comprehensive legal and tax guidance with respect to crypto asset products and transactions, many significant aspects of the U.S. and foreign tax treatment of transactions involving crypto assets, such as the purchase and sale of crypto assets on our platform, as well as the provision of staking rewards and other crypto asset incentives and rewards products, are uncertain, and it is unclear whether, when and what guidance may be issued in the future on the treatment of crypto asset transactions for U.S. and foreign tax purposes.
Any security incident resulting in a compromise of customer assets could result in substantial costs to us and require us to notify impacted individuals, and in some cases regulators, of a possible or actual incident, expose us to regulatory enforcement actions, including substantial fines, limit our ability to provide services, subject us to litigation, significant financial losses, damage our reputation, and adversely affect our business, operating results, financial condition, and cash flows.
Any security incident resulting in a compromise of customer assets could result in substantial costs to us and require us to notify impacted individuals, and in some cases regulators, of a possible or actual incident, expose us to regulatory 44 enforcement actions, including substantial fines, limit our ability to provide services, subject us to litigation, significant financial losses, damage our reputation, and adversely affect our business, operating results, financial condition, and cash flows.
U.S. federal and state and foreign regulatory authorities and law enforcement agencies, such as the Department of Justice, SEC, CFTC, FTC, or the Internal Revenue Service (“IRS”), and various state securities and financial regulators have taken and continue to take legal action against persons and entities alleged to be engaged in fraudulent schemes or other illicit activity involving crypto assets.
U.S. federal and state and foreign regulatory authorities and law enforcement agencies, such as the Department of Justice (“DOJ”), SEC, CFTC, FTC, or the Internal Revenue Service (“IRS”), and various state securities and financial regulators have taken and continue to take legal action against persons and entities alleged to be engaged in fraudulent schemes or other illicit activity involving crypto assets.
Any changes, bugs, technical or regulatory issues with third-party platforms, our relationships with mobile manufacturers and carriers, or changes to their terms of service or policies could degrade our products’ functionalities, reduce or eliminate our ability to distribute our products, give preferential treatment to competitive products, limit our ability to deliver high quality offerings, or impose fees or other charges, any of which could affect our product usage and harm our business.
Any changes, bugs, technical or regulatory issues with third-party platforms, our relationships with mobile manufacturers and 70 carriers, or changes to their terms of service or policies could degrade our products’ functionalities, reduce or eliminate our ability to distribute our products, give preferential treatment to competitive products, limit our ability to deliver high quality offerings, or impose fees or other charges, any of which could affect our product usage and harm our business.
If an attacker is able to access or obtain the super user privileges of a smart contract, or if a smart contract’s super users or core community members take actions that adversely affect the smart contract, our customers who hold and transact in the affected crypto assets may experience decreased functionality and value of the applicable crypto assets, up to and including a total loss of the value of such crypto assets.
If an attacker is able to access or obtain the super user privileges of a smart contract, or if a smart contract’s super users or core community members take actions that adversely affect the smart contract, our customers who hold and transact in the affected crypto assets may experience decreased functionality and value of the applicable 60 crypto assets, up to and including a total loss of the value of such crypto assets.
Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the group’s annual global turnover, whichever is highest. Additionally, the United Kingdom (the “U.K.”) implemented its own Data Protection Act, effective in May 2018 and statutorily amended in 2019, which is further supplemented by the U.K.
Administrative fines under the GDPR can amount up to 20 million Euros or four percent of the group’s annual global turnover, whichever is highest. Additionally, the United Kingdom (the “U.K.”) implemented its 68 own Data Protection Act, effective in May 2018 and statutorily amended in 2019, which is further supplemented by the U.K.
In some cases, the measures we have implemented to detect and deter fraud have led to poor customer experiences, including indefinite account inaccessibility for some of our customers, which increases our customer support costs and can compound damages. We could incur significant costs in compensating our customers, such as if a transaction was unauthorized, erroneous, or fraudulent.
In some cases, the measures we have implemented to detect and deter fraud have led to poor customer experiences, including indefinite account inaccessibility for some of our customers, which increases our customer support costs and can compound damages. We could incur significant costs in compensating our customers, such as if a transaction was unauthorized, erroneous, or 49 fraudulent.
Further, we place great importance on safeguarding crypto assets we custody and keeping them bankruptcy remote from our general creditors, and in June 2022 we updated our Retail User Agreement to clarify the applicability of UCC Article 8 to custodied crypto assets- the same legal protection that our institutional custody and prime broker clients also rely upon.
We place great importance on safeguarding crypto assets we custody and keeping them bankruptcy remote from our general creditors, and in June 2022 we updated our Retail User Agreement to clarify the applicability of UCC Article 8 to custodied crypto assets – the same legal protection that our institutional custody and prime broker clients also rely upon.
While in 2022, we reduced our activity with respect to acquisitions and investments due to market conditions, we may still from time to time make further acquisitions and investments. As part of our business strategy, we continue to routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, entries into new businesses, joint ventures, and other transactions.
While in 2022 and 2023, we reduced our activity with respect to acquisitions and investments due to market conditions, we may still from time to time make further acquisitions and investments. As part of our business strategy, we continue to routinely conduct discussions and evaluate opportunities for possible acquisitions, strategic investments, entries into new businesses, joint ventures, and other transactions.
Moreover, to the extent that any system failure or similar event results in damages to our customers or their business partners, these customers or partners could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
Moreover, to the extent that any system failure or similar event results in damages to our customers or 42 their business partners, these customers or partners could seek significant compensation or contractual penalties from us for their losses, and those claims, even if unsuccessful, would likely be time-consuming and costly for us to address.
Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms.
Any claims or litigation could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our products or services or using certain technologies, force us to implement expensive work-arounds, or impose other 71 unfavorable terms.
We have encountered and will continue to encounter risks and difficulties as described in this section. If we do not manage these risks successfully, our business may be adversely impacted. If our growth rate were to decline significantly or become negative, it could adversely affect our operating results and financial condition.
We have encountered and will continue to encounter risks and difficulties as described in this section. If we do not manage these risks successfully, our business may be adversely impacted. If our revenue growth rate were to decline significantly or become negative, it could adversely affect our operating results and financial condition.
While we have not incurred any material losses to date, if any of the foregoing events were to occur, our reputation and relationships with borrowers, and our financial results, could be harmed. We intend to continue to explore other products, models, and structures for offering consumer and commercial financing, and other forms of credit and loan products.
While we have not incurred any material losses to date, if any of the foregoing events were to occur, our reputation and relationships with borrowers, and our financial results, could be harmed. We intend to continue to explore other products, models, and structures for offering commercial financing, and other forms of credit and loan products.
These methods may not adequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations in the market. Further, as a result of the 2022 Events or similar market disruptions in the future, we may reevaluate our risk management policies and procedures.
These methods may not adequately prevent losses, particularly as they relate to extreme market movements, which may be significantly greater than historical fluctuations in the market. Further, as a result of the 2022 Events or similar market disruptions in the future, we may 56 reevaluate our risk management policies and procedures.
Changes in law have also increased the penalties for money transmitters for certain illegal activities, and government authorities may consider increased or additional penalties from time to time. Owners of intellectual property rights or government authorities may seek to bring legal action against money transmitters, including us, for involvement in the sale of infringing or allegedly infringing items.
Changes in law have also increased the penalties for money transmitters for certain illegal activities, and government authorities may consider increased or additional penalties from time to time. 55 Owners of intellectual property rights or government authorities may seek to bring legal action against money transmitters, including us, for involvement in the sale of infringing or allegedly infringing items.
Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the establishment, maintenance, and scaling of our compliance, audit, and reporting systems to continuously keep pace with our customer activity and transaction volume, as well as our ability to attract and retain qualified compliance and other risk management personnel.
Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the establishment, maintenance, and scaling of our compliance, internal audit, and reporting systems to continuously keep pace with our customer activity and transaction volume, as well as our ability to attract and retain qualified compliance and other risk management personnel.
We maintain complex treasury operations to manage and move customer fiat currency and crypto assets across our platforms and to comply with regulatory requirements. However, it is possible we may experience errors in fiat currency and crypto asset handling, accounting, and regulatory reporting that lead us to be out of compliance with these requirements.
We maintain complex treasury operations to manage and move customer fiat currency and crypto assets across our platforms and to comply with regulatory requirements. However, it is possible we may experience errors in fiat currency and crypto asset handling, accounting, and regulatory reporting that 64 lead us to be out of compliance with these requirements.
If our estimates or judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
If our estimates or judgment relating to our critical accounting estimates prove to be incorrect, our operating results could be adversely affected. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Consequently, developments in any jurisdiction may influence other jurisdictions. New developments in one jurisdiction may be extended to additional services and other jurisdictions. As a result, the risks created by any new law or regulation in one jurisdiction are magnified by the potential that they may be replicated, affecting our business in another place or involving another service.
Consequently, developments in any jurisdiction may influence other jurisdictions. New 35 developments in one jurisdiction may be extended to additional services and other jurisdictions. As a result, the risks created by any new law or regulation in one jurisdiction are magnified by the potential that they may be replicated, affecting our business in another place or involving another service.
Any integration process may require significant time and resources, and we may not be able to manage the process successfully, including successfully securing regulatory approvals which may be required to close the transaction and to continue to operate the target firm’s business or products in a manner that is useful to us.
Any integration process may require significant time and resources, and we may not be able to manage the process successfully, including 53 successfully securing regulatory approvals which may be required to close the transaction and to continue to operate the target firm’s business or products in a manner that is useful to us.
There can be no assurance that the IRS, the U.S. state revenue agencies or other foreign tax authorities, will not alter their respective positions with respect to crypto assets in the future or that a court would uphold the treatment set forth in existing guidance.
There can be no assurance that the IRS, the U.S. state revenue agencies or other foreign tax authorities, will not alter their respective positions with respect to crypto assets in the future or that a court would uphold the treatment set forth in existing positions.
If financial accounting standards undergo significant changes, our operating results could be adversely affected. The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles.
If financial accounting standards undergo significant changes, our operating results could be adversely affected. The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the SEC, and various other bodies formed to promulgate and interpret appropriate accounting principles.
Our existing competitors have, and our potential competitors are expected to have, various competitive advantages over us, such as: • the ability to trade crypto assets and offer products and services that we do not support or offer on our platform (due to constraints from regulatory authorities, our banking partners, and other factors) such as tokens that constitute securities or derivative instruments under U.S. or foreign laws; • greater name recognition, longer operating histories, larger customer bases, and larger market shares; • larger sales and marketing budgets and organizations; • more established marketing, banking, and compliance relationships; • greater customer support resources; • greater resources to make acquisitions; • lower labor, compliance, risk mitigation, and research and development costs; • larger and more mature intellectual property portfolios; 35 Table of Contents • greater number of applicable licenses or similar authorizations; • established core business models outside of the trading of crypto assets, allowing them to operate on lesser margins or at a loss; • operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and • substantially greater financial, technical, and other resources.
Our existing competitors have, and our potential competitors are expected to have, various competitive advantages over us, such as: • the ability to trade crypto assets and offer products and services that we do not support or offer on our platform (due to constraints from regulatory authorities, our banking partners, and other factors) such as tokens that constitute securities or derivative instruments under U.S. or foreign laws; • greater name recognition, longer operating histories, larger customer bases, and larger market shares; • larger sales and marketing budgets and organizations; • more established marketing, banking, and compliance relationships; • greater customer support resources; • greater resources to make acquisitions; • lower labor, compliance, risk mitigation, and research and development costs; • larger and more mature intellectual property portfolios; • greater number of applicable licenses or similar authorizations; • established core business models outside of the trading of crypto assets, allowing them to operate on lesser margins or at a loss; • operations in certain jurisdictions with lower compliance costs and greater flexibility to explore new product offerings; and • substantially greater financial, technical, and other resources.
For instance, a user may incorrectly enter our wallet’s public key or the desired recipient’s public key when depositing and withdrawing from our platforms, respectively. Alternatively, a user may transfer crypto assets to a wallet address that the user does not own, control or hold the private keys to.
For instance, 58 a user may incorrectly enter our wallet’s public key or the desired recipient’s public key when depositing and withdrawing from our platforms, respectively. Alternatively, a user may transfer crypto assets to a wallet address that the user does not own, control or hold the private keys to.
If such factors are negatively impacted, our business, operating results and financial condition could be adversely affected. We have in the past, and may in the future, enter into partnerships, collaborations, joint ventures, or strategic alliances with third parties.
If such factors are negatively impacted, our business, operating results and financial condition could be adversely affected. 25 We have in the past, and may in the future, enter into partnerships, collaborations, joint ventures, or strategic alliances with third parties.
Moreover, in October 2021, the President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, issued a joint report that recommended legislation that would subject stablecoin issuers and wallet providers to increased federal oversight.
Moreover, in October 2021, the President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation (“FDIC”), and the Office of the Comptroller of the Currency, issued a joint report that recommended legislation that would subject stablecoin issuers and wallet providers to increased federal oversight.
Armstrong, our co-founder and Chief Executive Officer, members of our executive team, and other key employees across product, engineering, risk management, finance, compliance and legal, and marketing. Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled employees.
Armstrong, our co-founder and Chief 72 Executive Officer, members of our executive team, and other key employees across product, engineering, risk management, finance, compliance and legal, and marketing. Our future success depends on our ability to attract, develop, motivate, and retain highly qualified and skilled employees.
Because we rely on third parties to provide these services and to facilitate certain of our business activities, we face increased operational risks. We do not directly manage the operation of any of these third parties, including their data center facilities that we use.
Because we rely on third parties to provide 40 these services and to facilitate certain of our business activities, we face increased operational risks. We do not directly manage the operation of any of these third parties, including their data center facilities that we use.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the compute or staking power on a crypto network, as has happened in the past, it may be able to manipulate transactions, which could cause financial losses to holders, damage the network’s reputation and security, and adversely affect its value; • the development of new technologies for mining, such as improved application-specific integrated circuits (commonly referred to as ASICs), or changes in industry patterns, such as the consolidation of mining power in a small number of large mining farms, could reduce the security of blockchain networks, lead to increased liquid supply of crypto assets, and reduce a crypto’s price and attractiveness; 28 Table of Contents • if rewards and transaction fees for miners or validators on any particular crypto network are not sufficiently high to attract and retain miners, a crypto network’s security and speed may be adversely affected, increasing the likelihood of a malicious attack; • many crypto assets have concentrated ownership or an “admin key”, allowing a small group of holders to have significant unilateral control and influence over key decisions related to their crypto networks, such as governance decisions and protocol changes, as well as the market price of such crypto assets; • the governance of many decentralized blockchain networks is by voluntary consensus and open competition, and many developers are not directly compensated for their contributions.
If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the compute or staking power on a crypto network, as has happened in the past, it may be able to manipulate transactions, which could cause financial losses to holders, damage the network’s reputation and security, and adversely affect its value; • the development of new technologies for mining, such as improved application-specific integrated circuits (commonly referred to as ASICs), or changes in industry patterns, such as the consolidation of mining power in a small number of large mining farms, could reduce the security of blockchain networks, lead to increased liquid supply of crypto assets, and reduce a crypto’s price and attractiveness; • if rewards and transaction fees for miners or validators on any particular crypto network are not sufficiently high to attract and retain miners, a crypto network’s security and speed may be adversely affected, increasing the likelihood of a malicious attack; • many crypto assets have concentrated ownership or an “admin key”, allowing a small group of holders to have significant unilateral control and influence over key decisions related to their crypto networks, such as governance decisions and protocol changes, as well as the market price of such crypto assets; 27 • the governance of many decentralized blockchain networks is by voluntary consensus and open competition, and many developers are not directly compensated for their contributions.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. The Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act to the fullest extent permitted by law.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the 84 Exchange Act or the rules and regulations thereunder. The Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act to the fullest extent permitted by law.
Our ability to make payments on our indebtedness, including the 2026 Convertible Notes and Senior Notes, and our other obligations will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.
Our ability to make payments on our indebtedness, including the 2026 Convertible Notes and Senior 50 Notes, and our other obligations will depend on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control.
Our officers, directors, employees, and large stockholders may encounter potential conflicts of interests with respect to their positions or interests in certain crypto assets, entities, and other initiatives, which could adversely affect our business and reputation.
Our officers, directors, employees, and large stockholders may encounter potential conflicts of interests with respect to their positions or interests in certain crypto assets, entities, and other 73 initiatives, which could adversely affect our business and reputation.
If we issue additional equity securities, including in the form of blockchain tokens, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued common stock.
If we issue additional equity securities, including in the form of blockchain tokens, stockholders will experience dilution, and the new 79 equity securities could have rights senior to those of our currently authorized and issued common stock.
Our restated certificate of incorporation and restated bylaws include provisions that: • permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; • authorize the issuance of “blank check” preferred stock and common stock that our board of directors could use to implement a stockholder rights plan or issue other shares of preferred stock or common stock, including blockchain tokens; 92 Table of Contents • provide that only our Chief Executive Officer, the chairperson of our board of directors, or a majority of our board of directors will be authorized to call a special meeting of stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit cumulative voting; • provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A common stock and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • provide that the board of directors is expressly authorized to make, alter, or repeal our restated bylaws; and • provide for advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Our restated certificate of incorporation and restated bylaws include provisions that: • permit our board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws; • authorize the issuance of “blank check” preferred stock and common stock that our board of directors could use to implement a stockholder rights plan or issue other shares of preferred stock or common stock, including blockchain tokens; 83 • provide that only our Chief Executive Officer, the chairperson of our board of directors, or a majority of our board of directors will be authorized to call a special meeting of stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit cumulative voting; • provide for a dual class common stock structure in which holders of our Class B common stock have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class A common stock and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • provide that the board of directors is expressly authorized to make, alter, or repeal our restated bylaws; and • provide for advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Armstrong has the ability to control the management and major strategic investments of our company as a result of his position as our Chief Executive Officer and his ability to control the election or replacement of our directors. As a board member and officer, Mr.
Armstrong has the ability to control the management and major strategic investments of our 81 company as a result of his position as our Chief Executive Officer and his ability to control the election or replacement of our directors. As a board member and officer, Mr.
A change in these principles or interpretations could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.
Moreover, a change in these principles or interpretations could have a significant effect on our reported financial results, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.
Persons that effect transactions in crypto assets that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs.
Persons that effect transactions in crypto assets, products or services that are securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an ATS in compliance with rules for ATSs.
We rely on third parties in connection with many aspects of our business, including payment processors, banks, and payment gateways to process transactions; cloud computing services and data centers that provide facilities, infrastructure, website functionality and access, components, and services, including databases and data center facilities and cloud computing; as well as third parties that provide outsourced customer service, compliance support and product development functions, which are critical to our operations.
We rely on third parties in connection with many aspects of our business, including payment processors, banks, and payment gateways to process transactions; cloud computing services and data centers that provide facilities, infrastructure, smart contract development, website functionality and access, components, and services, including databases and data center facilities and cloud computing; as well as third parties that provide outsourced customer service, compliance support and product development functions, which are critical to our operations.
The scope, determination, and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are subject cannot be predicted with certainty, and may result in: • substantial payments to satisfy judgments, fines, or penalties; • substantial outside counsel, advisor, and consultant fees and costs; • substantial administrative costs, including arbitration fees; • additional compliance and licensure requirements; • loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business; • loss of productivity and high demands on employee time; • criminal sanctions or consent decrees; • termination of certain employees, including members of our executive team; • barring of certain employees from participating in our business in whole or in part; • orders that restrict our business or prevent us from offering certain products or services; • changes to our business model and practices; • delays to planned transactions, product launches or improvements; and 38 Table of Contents • damage to our brand and reputation.
The scope, determination, and impact of claims, lawsuits, 36 government and regulatory investigations, enforcement actions, disputes, and proceedings to which we are subject cannot be predicted with certainty, and may result in: • substantial payments to satisfy judgments, fines, or penalties; • substantial outside counsel, advisor, and consultant fees and costs; • substantial administrative costs, including arbitration fees; • additional compliance and licensure requirements; • loss or non-renewal of existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for our business; • loss of productivity and high demands on employee time; • criminal sanctions or consent decrees; • termination of certain employees, including members of our executive team; • barring of certain employees from participating in our business in whole or in part; • orders that restrict our business or prevent us from offering certain products or services; • changes to our business model and practices; • delays to planned transactions, product launches or improvements; and • damage to our brand and reputation.
U.S. sanctions and export control laws and regulations generally restrict dealings by persons subject to U.S. jurisdiction with certain jurisdictions that are the target of comprehensive embargoes, currently the Crimea Region, the Donetsk People's Republic (DNR), and the Luhansk People's Republic (LNR) of Ukraine, Cuba, Iran, North Korea, and Syria, as well as with persons, entities, and governments identified on certain prohibited party lists.
U.S. sanctions and export control laws and regulations generally restrict dealings by persons subject to U.S. jurisdiction with certain jurisdictions that are the target of comprehensive embargoes, currently the Crimea Region, the Donetsk People’s Republic, and the Luhansk People’s Republic of Ukraine, Cuba, Iran, North Korea, and Syria, as well as with persons, entities, and governments identified on certain prohibited party lists.
If an applicable regulatory authority or a court, in either case having final determinative authority on the topic, were to determine that a supported crypto asset currently offered, sold, or traded on our platform is a security, we would not be able to offer such crypto asset for trading until we are able to do so in a compliant manner.
If an applicable regulatory authority or a court, in either case having final determinative authority on the topic, were to determine that a supported crypto asset, product or service currently offered, sold, or traded on our platform is a security, we would not be able to offer such crypto asset for trading, or product or service on our platform, until we are able to do so in a compliant manner.
A significant number of decentralized platforms have recently been developed and released, including on Ethereum, Tron, Polkadot, and Solana, and many such platforms have experienced significant growth and adoption.
A significant number of decentralized 34 platforms have recently been developed and released, including on Ethereum, Tron, Polkadot, and Solana, and many such platforms have experienced significant growth and adoption.
Our substantial indebtedness and other obligations may: • make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our 2026 Convertible Notes, Senior Notes, and our other obligations; • limit our ability to use our cash flow for working capital, capital expenditures, acquisitions or other general business purposes; • increase our cost of borrowing; • require us to use a substantial portion of our cash flow from operations to make debt service payments and pay our other obligations when due; • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions, including changes in interest rates and foreign exchange rates. 55 Table of Contents We provide secured loans to our customers, which exposes us to credit risks and may cause us to incur financial or reputational harm.
Our substantial indebtedness and other obligations may: • make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our 2026 Convertible Notes, Senior Notes, and our other obligations; • limit our ability to use our cash flow for working capital, capital expenditures, acquisitions or other general business purposes; • increase our cost of borrowing; • require us to use a substantial portion of our cash flow from operations to make debt service payments and pay our other obligations when due; • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions, including changes in interest rates and foreign exchange rates. 51 We provide secured loans to our customers, which exposes us to credit risks and may cause us to incur financial or reputational harm.
Our employees and service providers work from home and we are a remote-first company. This subjects us to heightened operational risks.
We are a remote-first company which subjects us to heightened operational risks. Our employees and service providers work from home and we are a remote-first company. This subjects us to heightened operational risks.
Our net revenue has significantly grown since our formation, but there is no assurance that this growth rate will continue in future periods and you should not rely on the revenue growth of any given prior quarterly or annual period as an indication of our future performance.
Our net revenue has significantly grown since our formation, but there is no assurance that growth will continue in future periods and you should not rely on the net revenue growth of any given prior quarterly or annual period as an indication of our future performance.
Moreover, our subscription and services revenue has grown over time, including interest income received in connection with USDC. Such revenue depends on a variety of factors, including demand for our subscription and services offerings, demand for USDC, the balance of USDC on our platform, interest rates, and ongoing relationships with third parties, such as the issuer of USDC.
Moreover, our subscription and services revenue has grown over time, including stablecoin revenue received in connection with USDC. Such revenue depends on a variety of factors, including demand for our subscription and services offerings, demand for USDC, the balance of USDC on our platform, interest rates, and ongoing relationships with third parties, such as the issuer of USDC.
Any similar events can lead to sanctions, penalties, changes to our business operations, or the revocation of licenses. Frequent launch of new products and services, including Learning Rewards (formerly “Earn”) campaigns, margin trading, lending functions, and the addition of new payment rails increase these risks.
Any similar events can lead to sanctions, penalties, changes to our business operations, or the revocation of licenses. Frequent launch of new products and services, including Learning Rewards campaigns, margin trading, lending functions, and the addition of new payment rails increase these risks.
To the extent that fluctuations in currency exchange rates cause our operating results to differ from expectations of investors, the market price of our Class A common stock could be adversely impacted. From time to time, we may engage in currency hedging activities to limit the risk of foreign currency exchange fluctuations.
To the extent that fluctuations in currency exchange rates cause our operating results to differ from expectations of investors, the market price of 77 our Class A common stock could be adversely impacted. From time to time, we may engage in currency hedging activities to limit the risk of foreign currency exchange rate fluctuations.
Any number of factors can negatively affect customer retention, growth, and engagement, including if: • customers increasingly engage with competing products and services, including products and services that we are unable to offer due to regulatory reasons; • we fail to introduce new and improved products and services, or if we introduce new products or services that are not favorably received; • we fail to support new and in-demand crypto assets or if we elect to support crypto assets with negative reputations; • there are changes in sentiment about the quality or usefulness of our products and services or concerns related to privacy, security, or other factors; • there are adverse changes in our products and services that are mandated by legislation, regulatory authorities, or litigation; • customers perceive the crypto assets on our platform to be bad investments, or experience significant losses in investments made on our platform; • technical or other problems prevent us from delivering our products and services with the speed, functionality, security, and reliability that our customers expect; • cybersecurity incidents, employee or service provider misconduct, or other unforeseen activities cause losses to us or our customers, including losses to assets held by us on behalf of our customers; • modifications to our pricing model or modifications by competitors to their pricing; • we fail to provide adequate customer service; • regulatory and governmental bodies in countries that we target for expansion express negative views towards crypto asset trading platforms and, more broadly, the cryptoeconomy; or • we or other companies in our industry are the subject of adverse media reports or other negative publicity.
Any number of factors can negatively affect customer retention, growth, and engagement, including if: • customers increasingly engage with competing products and services, including products and services that we are unable to offer due to regulatory reasons; • we fail to introduce new and improved products and services, or if we introduce new products or services that are not favorably received; • we fail to support new and in-demand crypto assets or if we elect to support crypto assets with negative reputations; • there are changes in sentiment about the quality or usefulness of our products and services or concerns related to privacy, security, fiat pegging or other factors; • there are adverse changes in our products and services that are mandated by legislation, 45 regulatory authorities, or litigation; • customers perceive the crypto assets on our platform to be bad investments, or experience significant losses in investments made on our platform; • technical or other problems prevent us from delivering our products and services with the speed, functionality, security, and reliability that our customers expect; • cybersecurity incidents, employee or service provider misconduct, or other unforeseen activities cause losses to us or our customers, including losses to assets held by us on behalf of our customers; • modifications to our pricing model or modifications by competitors to their pricing models; • we fail to provide adequate customer service; • regulatory and governmental bodies in countries that we target for expansion express negative views towards crypto asset trading platforms and, more broadly, the cryptoeconomy; or • we or other companies or high-profile figures in our industry are the subject of adverse media reports or other negative publicity.
Our main competition falls into the following categories: • traditional financial technology and brokerage firms that have entered the crypto asset market in recent years and offer overlapping features targeted at our customers; • companies focused on the crypto asset market, some of whom adhere to local regulations and directly compete with our platform, and many who choose to operate outside of local rules and regulations or in jurisdictions with less stringent local rules and regulations and are potentially able to more quickly adapt to trends, support a greater number of crypto assets, and develop new crypto-based products and services due to a different standard of regulatory scrutiny; • crypto-focused companies and traditional financial incumbents that offer point or siloed solutions specifically targeted at institutional customers; and 34 Table of Contents • stablecoins, other than USDC, and fiat currencies globally.
Our main competition falls into the following categories: • traditional financial technology and brokerage firms that have entered the crypto asset market in recent years and offer overlapping features targeted at our customers; • companies focused on the crypto asset market, some of whom adhere to local regulations and directly compete with our platform, and others who choose to operate outside of local rules and regulations or in jurisdictions with less stringent local rules and regulations and are potentially able to more quickly adapt to trends, support a greater number of crypto assets, and develop new crypto-based products and services due to a different standard of regulatory scrutiny; • crypto-focused companies and traditional financial incumbents that offer point or siloed solutions specifically targeted at institutional customers; and • stablecoins, other than USDC, and fiat currencies globally.
The increases in value of certain crypto assets, including Bitcoin, from 2016 to 2017, and then again in 2021, were followed by a steep decline in 2018 and again in 2022, which has adversely affected our net revenue and operating results.
The increases in value of certain crypto assets, including Bitcoin, from 2016 to 2017, and then again in 2021, 22 were followed by a steep decline in 2018 and again in 2022, which adversely affected our net revenue and operating results.
As another example, the recent extension of anti-money laundering requirements to certain crypto-related activities by the European Union’s Fifth Money Laundering Directive has increased the regulatory compliance burden for our business in Europe and, as a result of the fragmented approach to the implementation of its provisions, resulted in distinct and divergent national licensing and registration regimes for us in different E.U. member states.
As another example, the extension of anti-money laundering requirements to certain crypto-related activities by the European Union’s Fifth Money Laundering Directive, as updated by the European Union’s Sixth Money Laundering Directive, has increased the regulatory compliance burden for our business in Europe and, as a result of the fragmented approach to the implementation of its provisions, resulted in distinct and divergent national licensing and registration regimes for us in different E.U. member states.
Certain of our products and services are paid for by electronic transfer from bank accounts which exposes us to risks associated with returns and insufficient funds. Furthermore, some of our products and services are paid for by credit and debit cards through payment processors which exposes us to risks associated with chargebacks and refunds.
Certain of our products and services are paid for by electronic transfers from bank accounts, which exposes us to risks associated with returns and insufficient funds. Furthermore, some of our products and services are paid for by credit and debit cards through payment processors, which exposes us to risks associated with chargebacks and refunds.
There continues to be uncertainty with respect to the timing, character and amount of income inclusions for various crypto asset transactions including, but not limited to lending and borrowing crypto assets, staking rewards and other crypto asset incentives and rewards products that we offer.
There continues to be uncertainty with respect to the timing, character and amount of income 61 inclusions for various crypto asset transactions including, but not limited to lending and borrowing crypto assets, staking and other crypto asset incentives and products that we offer.
If the IRS determines that we are not in compliance with our tax reporting or withholding requirements with respect to customer crypto asset transactions, we may be exposed to significant penalties, which could adversely affect our financial position.
If the IRS determines that we are not in compliance with our tax reporting or withholding requirements with respect to customer crypto asset transactions, we may be exposed to significant taxes and penalties, which could adversely affect our financial position.
We intend to continue to make investments in our business to respond to business challenges, including developing new products and services, enhancing our operating infrastructure, expanding our international operations, and acquiring complementary businesses and technologies, all of which may require us to secure additional funds.
We intend to continue to make investments in our business, including developing new products and services, enhancing our operating infrastructure, expanding our international operations, and acquiring complementary businesses and technologies, all of which may require us to secure additional funds.
In addition, certain holders of shares of our common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of shares of Class A common stock or to include such shares in registration statements that we may file for us or other stockholders.
Further, certain holders of shares of our common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of shares of Class A common stock or to include such shares in registration statements that we may file for us or other stockholders.
At the same time, we have implemented additional processes and procedures to further compliance with these new sanctions. However, our activity in Russia and Belarus and with these customers associated with these countries subjects us to further exposure to sanctions as they are released.
At the same time, we have implemented additional processes and procedures to comply with these new sanctions. However, our activity in Russia and Belarus and with these customers associated with these countries subjects us to further exposure to sanctions as they are released.
These include decentralized applications, DeFi, yield farming, non-fungible tokens (“NFTs”), play-to-earn games, lending, staking, token wrapping, governance tokens, innovative programs to attract customers such as transaction fee mining programs, initiatives to attract traders such as trading competitions, airdrops and giveaways, staking reward programs, and novel cryptocurrency fundraising and distribution schemes, such as “initial exchange offerings.” We expect new services and technologies to continue to emerge and evolve, which may be superior to, or render obsolete, the products and services that we currently provide.
These include decentralized applications, DeFi, yield farming, non-fungible tokens (“NFTs”), play-to-earn games, lending, staking, token wrapping, governance tokens, innovative programs to attract customers such as transaction fee mining programs, initiatives to attract traders such as trading competitions, airdrops and giveaways, staking reward programs, “layer 2” blockchain networks, and novel cryptocurrency fundraising and distribution schemes, such as “initial exchange offerings.” We expect new services and technologies to continue to emerge and evolve, which may be superior to, or render obsolete, the products and services that we currently provide.
However, any material failure by us or our partners to maintain the necessary controls, policies, procedures or to manage the crypto assets we hold for our own investment and operating purposes could adversely impact our business, operating results, and financial condition.
Any material failure by us or our partners to maintain the necessary controls, policies, procedures or to manage the crypto assets we hold for our own investment and operating purposes could also adversely impact our business, operating results, and financial condition.
For example, Apple App Store’s restrictions related to crypto assets have disrupted the proposed launch of many features within the Coinbase and Coinbase Wallet apps, including our Learning Rewards (formerly “Earn”) and NFT transfer services and access to decentralized applications.
For example, Apple App Store’s restrictions related to crypto assets have disrupted the proposed launch of many features within the Coinbase and Coinbase Wallet apps, including our Learning Rewards and NFT transfer services and access to decentralized applications.
We recognize that the application of securities laws to the specific facts and circumstances of crypto assets may be complex and subject to change, and that a listing determination does not guarantee any conclusion under the U.S. federal securities laws.
We recognize that the application of securities laws to the specific facts and circumstances of crypto assets, products and services may be complex and subject to change, and that a listing determination does not guarantee any conclusion under the U.S. federal securities laws.
Further, we cannot provide assurance that our wallet will not be hacked or compromised. Crypto assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities.
Further, we cannot provide assurance that our wallets will not be hacked or compromised. Crypto assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities.
Similar replay attacks occurred in connection with the Bitcoin Cash and Bitcoin Cash SV network split in November 2018.
Similar 59 replay attacks occurred in connection with the Bitcoin Cash and Bitcoin Cash SV network split in November 2018.
Any such negative publicity could have an adverse effect on the size, activity, and loyalty of our customers and result in a decrease in net revenue, which could adversely affect our business, operating results, and financial condition. 60 Table of Contents Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams.
Any such negative publicity could have an adverse effect on the size, activity, and loyalty of our customers and result in a decrease in net revenue, which could adversely affect our business, operating results, and financial condition. Our platform may be exploited to facilitate illegal activity such as fraud, money laundering, gambling, tax evasion, and scams.
Among other provisions, MiCA is expected to introduce a comprehensive authorization and compliance regime for crypto asset service providers and a disclosure regime for the issuers of certain crypto assets, which is expected to impact our operations in the European Union.
Among other provisions, MiCA introduces a comprehensive authorization and compliance regime for crypto asset service providers and a disclosure regime for the issuers of certain crypto assets, which is expected to impact our operations in the European Union.
For example, a crypto asset that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration.
For example, a crypto asset, product or service that is a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration.
Additionally, the SEC has brought and may in the future bring enforcement actions against other cryptoeconomy participants and their product offerings that may cause us to modify or discontinue a product offering on our platform.
Additionally, the SEC has brought and may in the future bring enforcement actions against other cryptoeconomy participants and their product offerings and services that may cause us to modify or discontinue a product offering or service on our platform.
These claims could arise from fraud, misuse, unintentional use, settlement delay, insufficiency of funds, or other activities. Also, criminals are using increasingly sophisticated methods to engage in illegal activities, such as counterfeiting and fraud.
These risks could arise from fraud, misuse, unintentional use, settlement delay, insufficiency of funds, or other activities. Also, criminals are using increasingly sophisticated methods to engage in illegal activities, such as counterfeiting and fraud.
Our interaction with those applications, and the interaction of other blockchain users with any smart contracts or assets we may generate or control, could present legal, operational, reputational, and regulatory risks for our business. 32 Table of Contents We may be further subject to administrative sanctions for technical violations or customer attrition if the user experience suffers as a result.
Our interaction with those applications, and the interaction of other blockchain users with any smart contracts or assets we may generate or control, could present legal, operational, reputational, and regulatory risks for our business. We may be further subject to administrative sanctions for technical violations or customer attrition if the user experience suffers as a result.
As such, in addition to the factors impacting the broader cryptoeconomy described in this section, our revenue may be adversely affected if the markets for Bitcoin and Ethereum deteriorate or if their prices decline, including as a result of the following factors: • the reduction in mining rewards of Bitcoin, including block reward halving events, which are events that occur after a specific period of time and reduces the block reward earned by miners; • public sentiment related to the actual or perceived environmental impact of Bitcoin, Ethereum, and related activities, including environmental concerns raised by private individuals and governmental actors related to the energy resources consumed in the Bitcoin mining process; • the launch of Ethereum 2.0, including the migration of Ethereum to a proof-of-stake model; • disruptions, hacks, splits in the underlying networks also known as “forks”, attacks by malicious actors who control a significant portion of the networks’ hash rate such as double spend or 51% attacks, or other similar incidents affecting the Bitcoin or Ethereum blockchain networks; • hard “forks” resulting in the creation of and divergence into multiple separate networks, such as Bitcoin Cash and Ethereum Classic; • informal governance led by Bitcoin and Ethereum’s core developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self-determined participation, which may result in new changes or updates that affect their speed, security, usability, or value; • the ability for Bitcoin and Ethereum blockchain networks to resolve significant scaling challenges and increase the volume and speed of transactions; • the ability to attract and retain developers and customers to use Bitcoin and Ethereum for payment, store of value, unit of accounting, and other intended uses and the absence of another supported crypto asset to attract and retain developers and customers for the same; • transaction congestion and fees associated with processing transactions on the Bitcoin and Ethereum networks and the absence of another supported crypto asset to replace these transactions; 26 Table of Contents • the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed Bitcoin, or the transfer of Satoshi’s Bitcoins; • negative perception of Bitcoin or Ethereum; • development in mathematics, technology, including in digital computing, algebraic geometry, and quantum computing that could result in the cryptography being used by Bitcoin and Ethereum becoming insecure or ineffective; • regulatory or legislative restrictions or limitations on Bitcoin or Ethereum lending, mining or staking activities; • liquidity and credit risk issues experienced by other crypto platforms and other participants of the cryptoeconomy; and • laws and regulations affecting the Bitcoin and Ethereum networks or access to these networks, including a determination that either Bitcoin or Ethereum constitutes a security or other regulated financial instrument under the laws of any jurisdiction.
As such, in addition to the factors impacting the broader cryptoeconomy described in this section, our revenue may be adversely affected if the markets for Bitcoin and Ethereum deteriorate or if their prices decline, including as a result of the following factors: • the reduction in mining rewards of Bitcoin, including block reward halving events, which are 24 events that occur after a specific period of time and reduces the block reward earned by miners; • public sentiment related to the actual or perceived environmental impact of Bitcoin, Ethereum, and related activities, including environmental concerns raised by private individuals and governmental actors related to the energy resources consumed in the Bitcoin mining process; • the migration of Ethereum to a proof-of-stake model; • disruptions, hacks, splits in the underlying networks also known as “forks”, attacks by malicious actors who control a significant portion of the networks’ hash rate such as double spend or 51% attacks, or other similar incidents affecting the Bitcoin or Ethereum blockchain networks; • hard “forks” resulting in the creation of and divergence into multiple separate networks, such as Bitcoin Cash and Ethereum Classic; • informal governance led by Bitcoin and Ethereum’s core developers that lead to revisions to the underlying source code or inactions that prevent network scaling, and which evolve over time largely based on self-determined participation, which may result in new changes or updates that affect their speed, security, usability, or value; • the ability for Bitcoin and Ethereum blockchain networks to resolve significant scaling challenges and increase the volume and speed of transactions; • the ability to attract and retain developers and customers to use Bitcoin and Ethereum for payment, store of value, unit of accounting, and other intended uses and the absence of another supported crypto asset to attract and retain developers and customers for the same; • transaction congestion and fees associated with processing transactions on the Bitcoin and Ethereum networks and the absence of another supported crypto asset to replace these transactions; • the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed Bitcoin, or the transfer of Satoshi’s Bitcoins; • negative perception of Bitcoin or Ethereum; • development in mathematics, technology, including in digital computing, algebraic geometry, and quantum computing that could result in the cryptography being used by Bitcoin and Ethereum becoming insecure or ineffective; • adverse legal proceedings or regulatory enforcement actions, judgments, or settlements impacting cryptoeconomy participants; • regulatory, legislative or other compulsory or informal restrictions or limitations on Bitcoin or Ethereum lending, mining or staking activities; • liquidity and credit risk issues experienced by other crypto platforms and other participants of the cryptoeconomy; and • laws and regulations affecting the Bitcoin and Ethereum networks or access to these networks, including a determination that either Bitcoin or Ethereum constitutes a security or other regulated financial instrument under the laws of any jurisdiction.
We also generate a large portion of total revenue from our subscription and services, and such revenue has grown over time, primarily due to interest income growth in connection with USDC. Declines in the volume of crypto asset transactions, the price of crypto assets, or market liquidity for crypto assets generally may result in lower total revenue to us.
We also generate a large portion of total revenue from our subscription and services, and such revenue has grown over time, primarily due to stablecoin revenue growth in connection with USDC. Declines in the volume of crypto asset transactions, the price of crypto assets, or market liquidity for crypto assets generally may result in lower total revenue to us.
Within transaction revenue and subscription and services revenue, a meaningful concentration is from transactions in Bitcoin and Ethereum and interest income in connection with USDC, respectively. If revenue from these areas declines and is not replaced by new demand for crypto assets or other products and services, our business, operating results, and financial condition could be adversely affected.
Within transaction revenue and subscription and services revenue, a meaningful concentration is from transactions in Bitcoin and Ethereum and stablecoin revenue in connection with USDC, respectively. If revenue from these areas declines and is not replaced by new demand for crypto assets or other products and services, our business, operating results, and financial condition could be adversely affected.
In such cases, we may find it difficult to prevent a negative effect on employee morale or attrition beyond our planned reduction, in which case our products and services may suffer and our business, operating results, and financial condition could be adversely impacted. 80 Table of Contents In the event of employee or service provider misconduct or error, our business may be adversely impacted.
In such cases, we may find it difficult to prevent a negative effect on employee morale or attrition beyond our planned reduction, in which case our products and services may suffer and our business, operating results, and financial condition could be adversely impacted. In the event of employee or service provider misconduct or error, our business may be adversely impacted.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We are a remote-first company, meaning that for the vast majority of roles, our employees have the option to work remotely. As a result of this strategy, we do not maintain a corporate headquarters, but do maintain physical offices in major cities around the world for purposes of collaboration and team building.
Biggest changeWe hold all of our stockholder meetings virtually. As a result of this strategy, we do not maintain a corporate headquarters or principal executive offices, but do maintain physical offices in select major cities around the world for purposes of collaboration and team building.
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Item 2. Properties We are a remote-first company, meaning that for the vast majority of roles, our employees have the option to work remotely. Substantially all of our executive team meetings are held virtually, with meetings occasionally held in-person at locations that are either not in our offices or in various of our offices distributed around the world.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For a description of material legal proceedings in which we are involved, see Note 21.
Biggest changeItem 3. Legal Proceedings For a description of material legal proceedings in which we are involved, see Note 22. Commitments and Contingencies , of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference.
For example, we have received investigative subpoenas and other inquiries from various state attorneys general for documents and information pertaining to our business practices and policies, customer complaints, asset launches, certain ongoing litigation, and certain transfers of crypto assets.
For example, we have received investigative subpoenas and other inquiries from various state agencies and attorneys general for documents and information pertaining to our business practices and policies, customer complaints, asset launches, certain ongoing litigation, and certain transfers of crypto assets.
In addition, we have received investigative subpoenas from the SEC and similar subpoenas and demand letters from various state regulators for documents and information about certain of our customer programs, operations, and intended future products, including our staking, stablecoin and yield-generating products.
In addition, we have received investigative subpoenas from the SEC and similar subpoenas and demand letters from various state regulators for documents and information about certain of our customer programs, operations, and intended future products, including our staking, stablecoin and yield-generating products. We intend to cooperate fully with such investigations. These examples are not exhaustive. Item 4.
Commitments and Contingencies , in the Notes to our consolidated financial statements included in this Annual Report on Form 10-K, which is incorporated herein by reference. 94 Table of Contents We are not presently a party to any other legal or regulatory proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.
We are not presently a party to any other legal or regulatory proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.
Mine Safety Disclosures Not applicable. 95 Table of Contents PART II
Mine Safety Disclosures Not applicable. 87 PART II
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Also for example, in January 2021, the California Department of Fair Employment and Housing issued an investigative subpoena for documents and information related to certain of our business practices and policies, and the matter is ongoing. We intend to cooperate fully with such investigations. These examples are not exhaustive. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeBenchmark Financial Services Index, and the S&P North American Technology Index and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based upon historical data and should not be considered an indication of potential future stock price performance. 96 Table of Contents Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None.
Biggest changeThis graph assumes the investment of $100 in our Class A common stock at the closing sale price of $328.28 per share on April 14, 2021, and for each index and assumes the reinvestment of dividends, if any. 88 The comparisons shown in the graph below are based upon historical data and should not be considered an indication of potential future stock price performance.
The graph below compares the cumulative total return to stockholders of our Class A common stock between April 14, 2021 (the date our Class A common stock commenced trading on the Nasdaq Global Select Market) and December 31, 2022 to the Nasdaq Composite Index, the Nasdaq U.S.
The graph below compares the cumulative total return to stockholders of our Class A common stock between April 14, 2021 (the date our Class A common stock commenced trading on the Nasdaq Global Select Market) and December 31, 2023 relative to the Nasdaq Composite Index, the Nasdaq U.S.
Our Class B common stock is not listed or traded on any stock exchange. Holders of Record As of the close of business on February 14, 2023, there were 303 registered holders of record of our Class A common stock and 11 registered holders of record of our Class B common stock.
Our Class B common stock is not listed or traded on any stock exchange. Holders of Record As of the close of business on February 8, 2024, there were 279 registered holders of record of our Class A common stock and 8 registered holders of record of our Class B common stock.
We are not obligated to pay any dividends on the Class A common stock or Class B common stock and we currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future.
We are not obligated to pay any dividends on the Class A common stock or Class B common stock, and we currently do not anticipate paying any dividends on our capital stock in the foreseeable future.
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Benchmark Financial Services Index and the S&P North American Technology Index over the same period. This graph assumes the investment of $100 in our Class A common stock at the closing sale price of $328.28 per share on April 14, 2021, and the Nasdaq Composite Index, the Nasdaq U.S.
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Benchmark Financial Services Index, the S&P North American Technology Index, and the price of Bitcoin.
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Historical Bitcoin prices are primarily based on data obtained from our platform. Where such data is not available (e.g., during a platform outage), such data may sometimes be sourced from other third-party exchanges or data providers. Recent Sales of Unregistered Securities None.
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Issuer Purchases of Equity Securities The following table contains information relating to the repurchases of our Class A common stock made by us in the three months ended December 31, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share October 1 – October 31, 2023 — $ — November 1 – November 30, 2023 — — December 1 – December 31, 2023 4 18.13 4 $ 18.13 ___________________ (1) Represents shares of unvested Class A common stock that were repurchased by us from former employees upon termination of employment in accordance with the terms of the employees’ stock option agreements.
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We repurchased the shares from the former employees at the respective original exercise prices. Item 6. [Reserved] 89

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest change(Benefit from) provision for income taxes (Benefit from) provision for income taxes includes income taxes related to foreign jurisdictions and U.S. federal and state income taxes. 104 Table of Contents Results of Operations The following table summarizes the historical consolidated statements of operations data: Year Ended December 31, 2022 2021 2020 (in thousands) Revenue: Net revenue $ 3,148,815 $ 7,354,753 $ 1,141,167 Other revenue 45,393 484,691 136,314 Total revenue 3,194,208 7,839,444 1,277,481 Operating expenses: Transaction expense 629,880 1,267,924 135,514 Technology and development 2,326,354 1,291,561 271,732 Sales and marketing 510,089 663,689 56,782 General and administrative 1,600,586 909,392 279,880 Restructuring 40,703 — — Other operating expense, net 796,804 630,308 124,622 Total operating expenses 5,904,416 4,762,874 868,530 Operating (loss) income (2,710,208) 3,076,570 408,951 Interest expense 88,901 29,160 — Other expense (income), net 265,473 20,463 (248) (Loss) income before income taxes (3,064,582) 3,026,947 409,199 (Benefit from) provision for income taxes (439,633) (597,173) 86,882 Net (loss) income $ (2,624,949) $ 3,624,120 $ 322,317 105 Table of Contents The following table presents the components of the consolidated statements of operations data as a percentage of total revenue: Year Ended December 31, 2022 2021 2020 (as a % of total revenue) (1) Total revenue 100 % 100 % 100 % Operating expenses: Transaction expense 20 16 11 Technology and development 73 16 21 Sales and marketing 16 9 4 General and administrative 50 12 22 Restructuring 1 — — Other operating expense, net 25 8 10 Total operating expenses 185 61 68 Operating (loss) income (85) 39 32 Interest expense 3 — — Other expense (income), net 8 — — (Loss) income before income taxes (96) 39 32 (Benefit from) provision for income taxes (14) (7) 7 Net (loss) income (82) % 46 % 25 % ___________________ (1) Figures presented above may not sum precisely due to rounding.
Biggest changeBenefit from income taxes Benefit from income taxes includes income taxes related to foreign jurisdictions and U.S. federal and state income taxes. 95 Table of Contents Results of Operations The following table summarizes the historical consolidated statements of operations data (in thousands) and each component as a percentage of total revenue: Year Ended December 31, 2023 2022 2021 $ % (1) $ % (1) $ % (1) Revenue: Net revenue $ 2,926,540 94 $ 3,148,815 99 $ 7,354,753 94 Other revenue 181,843 6 45,393 1 484,691 6 Total revenue 3,108,383 100 3,194,208 100 7,839,444 100 Operating expenses: Transaction expense 420,705 14 629,880 20 1,267,924 16 Technology and development 1,324,541 43 2,326,354 73 1,291,561 16 Sales and marketing 332,312 11 510,089 16 663,689 9 General and administrative 1,041,308 33 1,600,586 50 909,392 12 Crypto asset impairment, net (34,675) (1) 722,211 23 153,160 2 Restructuring 142,594 5 40,703 1 — — Other operating expense, net 43,260 1 74,593 2 477,148 6 Total operating expenses 3,270,045 105 5,904,416 185 4,762,874 61 Operating (loss) income (161,662) (5) (2,710,208) (85) 3,076,570 39 Interest expense 82,766 3 88,901 3 29,160 — Other (income) expense, net (167,583) (5) 265,473 8 20,463 — (Loss) income before income taxes (76,845) (2) (3,064,582) (96) 3,026,947 39 Benefit from income taxes (171,716) (6) (439,633) (14) (597,173) (7) Net income (loss) $ 94,871 3 $ (2,624,949) (82) $ 3,624,120 46 __________________ (1) Percentage of total revenue.
Critical Accounting Policies and Estimates Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures.
Critical Accounting Estimates Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures.
As a result, our crypto assets are less liquid than our existing cash and cash equival ents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Customer accommodations and corporate expenses denominated in crypto assets are fulfilled with crypto assets held for operational purposes.
As a result, our crypto assets are less liquid than our cash and cash equival ents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Customer accommodations and corporate expenses denominated in crypto assets are fulfilled with crypto assets held for operational purposes.
Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial cash, and in-transit customer receivables. As of December 31, 2022 and 2021, our eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities.
Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial cash, and in-transit customer receivables. As of December 31, 2023 and 2022, our eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities.
Revenue-generating transactions include active transactions such as buying or selling crypto assets through our Invest product or passive transactions such as earning a staking reward. MTUs also engage in transactions that are non-revenue generating such as send and receive. MTUs may overstate the number of unique consumers due to differences in product architecture or user behavior.
Revenue-generating transactions include active transactions such as buying or selling crypto assets or passive transactions such as earning a staking reward. MTUs also engage in transactions that are non-revenue generating such as send and receive. MTUs may overstate the number of unique consumers due to differences in product architecture or user behavior.
Our future earnings and cash flows will be impacted when we choose to monetize our crypto assets and the variability of our earnings will be dependent on the future fair value of such crypto assets.
Our future earnings and cash flows will be impacted when we choose to monetize our crypto assets and the variability of our earnings on these transactions will be dependent on the future fair value of such crypto assets.
(2) The fair value of crypto assets held is based on quoted market prices for one unit of each crypto asset reported on our platform at 11:59 pm Coordinated Universal Time (UTC) on the last day of the respective period multiplied by the quantity of each crypto asset held.
(2) The fair value of crypto assets held is the fair value of assets recorded at cost plus assets recorded at fair value and is based on quoted market prices for one unit of each crypto asset reported on our platform at 11:59 pm Coordinated Universal Time (UTC) on the last day of the respective period multiplied by the quantity of each crypto asset held.
We are also required to hold corporate liquid assets at our subsidiaries to meet capital requirements established by our regulators based on the value of crypto assets held in custody. We are in compliance with these capital requirements.
We are also required to hold corporate liquid assets at our subsidiaries to meet capital requirements established by our regulators based on the value of crypto assets held in custody. As of December 31, 2023, we were in compliance with these capital requirements.
Summary of Significant Accounting Policies , of the Notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report. 119 Table of Contents
Summary of Significant Accounting Policies of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of new accounting pronouncements adopted and not yet adopted as of the date of this Annual Report on Form 10-K.
Other expense (income), net Other expense (income), net includes the following items: • gains and losses on investments, net, which consists primarily of realized and unrealized gains and losses from fair value adjustments on investments; • realized impacts on foreign exchange resulting from the settlement of our foreign currency assets, liabilities and foreign exchange forward contracts, as well as unrealized impacts on foreign exchange resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies; and • impairment recognized on certain strategic equity investments in privately held companies without readily determinable fair values.
Other (income) expense, net Other (income) expense, net includes the following items: • net gains on the repurchase of certain of our long-term debt; • realized foreign exchange impacts resulting from the settlement of our foreign currency assets and liabilities, and unrealized foreign exchange impacts resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies; • impairment recognized on certain strategic equity investments in privately held companies without readily determinable fair values and gains and losses on investments, net, which consists primarily of realized and unrealized gains and losses from fair value adjustments; and • unrealized gains and losses from fair value adjustments on certain financial instruments.
The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operation s.
The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operation s.
In January 2023, S&P Global Ratings announced an additional downgrade of our issuer credit rating and senior unsecured debt from BB to BB-. In June 2022, Moody’s Investors Service (“Moody’s”) announced a downgrade of our Corporate Family Rating (“CFR”) to Ba3 from Ba2 and downgraded our guaranteed senior unsecured notes to Ba2 from Ba1.
In January 2023, S&P Global Ratings announced a downgrade of our issuer credit rating and senior unsecured debt from BB to BB-, and Moody’s Investors Service (“Moody’s”) announced a downgrade of our Corporate Family Rating (“CFR”) to B2 from Ba3 and downgraded our guaranteed senior unsecured notes to B1 from Ba2.
In May 2021, we issued an aggregate of $1.4 billion of 2026 Convertible Notes that mature on June 1, 2026, unless converted, redeemed or repurchased on an earlier date. We periodically issue short-term debt to support certain business operations. See Notes 12. Accrued Expenses and Other Current Liabilities and 13.
In May 2021, we issued an aggregate of $1.4 billion of 2026 Convertible Notes that mature on June 1, 2026, unless converted, redeemed or repurchased on an earlier date. We periodically issue short-term debt to support certain business operations.
The decrease in sales and marketing expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021, was due to the following: • a decrease of $316.5 million in digital advertising spend due to lower investment in paid media in 2022; and • a decrease of $32.4 million in r eferral and promotion fees related to marketing initiatives such as sweepstakes and incentivized campaigns; offset by • an increase of $128.7 million related to higher offline and brand spend; and • an increase of $59.6 million in personnel-related expenses, including a $41.2 million increase in stock-based compensation expense, due to a 109% increase in average headcount.
Sales and marketing expenses decreased for the year ended December 31, 2022 as compared to 2021, primarily due to: • higher personnel-related expenses, including a $41.2 million increase in stock-based compensation expense, due to a 109% increase in average headcount; offset by • a decrease in marketing programs, primarily due to a $316.5 million reduction in digital advertising spend due to lower investment in paid media, offset in part by $128.7 million higher offline and brand spend; and • a decrease of $32.4 million in referral and promotion fees related to marketing initiatives such as sweepstakes and incentivized campaigns, included within other.
Receipts of crypto assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt. Recent Accounting Pronouncements See Note 2.
Receipts of crypto assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt.
The transaction fee earned is based on the price and quantity of the crypto asset that is bought, sold, or converted. Transaction revenue is recognized at the time the transaction is processed and is directly correlated with Trading Volume.
The transaction fee earned is based on the price and quantity of the crypto asset that is bought, sold, or converted. Transaction revenue is recognized at the time the transaction is processed. Transaction revenue is directly correlated with Trading Volume, which is driven by the number of spot trade transactions processed on our platform.
We do not use customer crypto assets as collateral for any loan, margin, rehypothecation, or other similar activities without their consent to which we or our affiliates are a party.
We do not use customer crypto assets as collateral for any loan, margin, rehypothecation, or other similar activities without their consent to which we or our affiliates are a party, and we did not have any such arrangements as of December 31, 2023.
(5) 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. has 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. Se e Notes 7 . Leases , 12.
(5) Remaining amounts committed under a consent order with NYDFS. 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.
We are required to maintain a collateral to loan ratio per our borrowing agreements. Any significant change in crypto asset prices could impact the value of the crypto asset borrowed or the value of crypto asset collateral. Current downward trends in crypto asset prices have not had a material impact on the value of our corporate collateral.
Such activities are not material to our business. We are required to maintain a collateral to loan ratio per our borrowing agreements. Any significant change in crypto asset prices could impact the value of the crypto asset borrowed or the value of crypto asset collateral .
(2) Committed spend primarily relating to technology and advertising. (3) Assumes the 2026 Convertible Notes are not converted into our Class A common stock, repurchased or redeemed prior maturity. (4) Assumes the 2028 and 2031 Senior Notes are not repurchased or redeemed prior to maturity.
(2) Committed spend for non-cancellable purchase obligations greater than $1.0 million per obligation, primarily relating to technology and advertising. (3) Assumes the 2026 Convertible Notes are not converted into our Class A common stock, repurchased or redeemed prior to maturity. (4) Assumes the 2028 and 2031 Senior Notes are not repurchased or redeemed prior to maturity.
Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards, using enacted tax rates.
We utilize the asset and liability method for computing our income tax provision. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards, using enacted tax rates.
The increase in interest expense was predominantly due to a full-year impact of interest expense recognized on our Convertible Notes that were issued in May 2021 and our Senior Notes that were issued in September 2021.
The increase in interest expense for the year ended December 31, 2022 as compared to 2021 was primarily due to a full-year impact of interest expense recognized on our 2026 Convertible Notes that were issued in May 2021 and our Senior Notes that were issued in September 2021.
As a result of our downgrade, our ability to raise additional financing from external sources in the future may be adversely affected and we may not be able to raise capital on terms acceptable to us or at all. In addition, even if debt financing is available, the cost of additional financing may be significantly higher than our current debt.
As a result of our credit rating downgrade, our ability to raise additional financing from external sources in the future may be adversely affected and we may not be able to raise capital on terms acceptable to us or at all.
The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes. For U.S. federal tax purposes, crypto asset transactions are treated on the same tax principles as property transactions.
The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes. See Note 20.
In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
In addition, other companies, including companies in our industry, may calculate Adjusted EBITDA differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our disclosure of Adjusted EBITDA as a tool for comparison.
General and administrative General and administrative expenses include personnel-related expenses incurred to support our business, including executive, customer support, compliance, finance, human resources, legal, and other support operations.
General and administrative General and administrative expenses include personnel-related expenses incurred to support our business, including executive, customer support, compliance, finance, human resources, legal, and other support operations. These expenses also include costs of professional services and software subscriptions for support services.
General and administrative expenses for the year ended December 31, 2022 increased by $691.2 million compared to the year ended December 31, 2021 predominantly driven by the following: • an increase of $290.1 million in customer support costs due to an increase in managed services to support compliance operations and customer experience, as a result of increased capacity needs to address backlogs from 2021, and an increase in personnel-related expenses; • an increase of $230.6 million in personnel-related expenses excluding customer support, including a $149.4 million increase in stock-based compensation expense, primarily due to a 92% increase in average headcount ; • an increase of $75.1 million in settlement costs largely due to a one-time settlement cost accrual of $50.0 million with NYDFS in 2022; • an increase of $71.0 million in professional services due to higher legal fees related to litigation, regulatory, compliance and business consulting; and • an increase of $22.1 million in software license costs to support business, security and risk applications; offset by • a decrease of $39.2 million in direct listing costs associated with our Direct Listing in the second quarter of 2021.
General and administrative expenses increased for the year ended December 31, 2022, as compared to 2021, primarily due to: • an increase in personnel-related expenses excluding customer support, driven primarily by a 92% increase in average headcount; • an increase in customer support costs, reflecting a $198.8 million increase in costs of managed services to support compliance operations and customer experience, as a result of increased capacity needs to address backlogs from 2021, and an increase of $91.3 million in customer support personnel-related expenses; • an increase in professional services, reflecting $32.9 million in higher legal fees related to litigation, regulatory, and compliance and an increase of $30.2 million in business consulting; and • an increase in other general and administrative expenses, largely driven by $75.1 million in higher settlement costs, which included a $50.0 million accrual related to the settlement with NYDFS, and $22.1 million in incremental software license costs to support business, security, and risk applications, partially offset by a decrease of $39.2 million in costs associated with our Direct Listing in 2021.
Technology and development expenses for the year ended December 31, 2022 increased by $1.0 billion compared to the year ended December 31, 2021, predominantly due to the following: • an increase of $680.3 million in personnel-related expenses, including a $518.9 million increase i n stock-based compensation expense, primarily due to an 87% increase in average headcount and the full-year impact of equity instruments issued in conjunction with business combinations that occurred throughout 2021 and early in 2022 ; • an increase of $198.1 million in software and service costs, driven by continued investment in our products and platform, along with an increase in headcount driven by software licenses ; and • an increase of $83.4 million in amortization expense, related to amortization on capitalized software and assembled workforce. 108 Table of Contents Sales and marketing expenses for the year ended December 31, 2022 decreased by $153.6 million compared to the year ended December 31, 2021.
Technology and development expenses increased for the year ended December 31, 2022 as compared to 2021, primarily due to: • higher personnel-related expenses, including a $518.9 million increase i n stock-based compensation expense, reflecting an 87% increase in average headcount and the full-year impact of equity instruments issued in conjunction with business combinations that occurred throughout 2021 and early in 2022; • a $143.0 million increase in website hosting costs as we continued to invest in our products and platform, and a $55.1 million increase in software licenses driven by the increase in average headcount; and 100 Table of Contents • an increase in amortization expense, related to amortization of capitalized software and assembled workforce.
Restructuring expenses were $40.7 million for the year ended December 31, 2022. The $40.7 million is driven by separation pay and other personnel costs related to the workforce reduction in June 2022. There were no restructuring expenses for the year ended December 31, 2021.
Restructuring expense was $40.7 million for the year ended December 31, 2022 and was driven by separation pay and other personnel costs related to the workforce reduction in June 2022 and the subsequent release of accruals of certain costs related thereto that were not utilized. There was no restructuring expense for the year ended December 31, 2021.
However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Management makes estimates, assumptions, and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.
We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.
Indebtedness of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our short and long-term borrowings, respectively. In August 2022, S&P Global Ratings announced a downgrade of our issuer credit rating and senior unsecured debt from BB+ to BB .
Indebtedness of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our short and long-term borrowings, respectively.
Commitments and Contingencies of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information relating to debt and income taxes as of December 31, 2022 . 116 Table of Contents Cash flows Year Ended December 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities (1) $ (1,585,419) $ 4,038,172 $ 293,548 Net cash (used in) provided by investing activities (663,822) (1,124,740) 50,822 Net cash (used in) provided by financing activities (1) (5,838,518) 9,976,084 2,729,323 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (8,087,759) $ 12,889,516 $ 3,073,693 Effect of exchange rates on cash, cash equivalents, and restricted cash $ (163,257) $ (64,883) $ (2,081) Change in customer custodial cash $ (5,547,481) $ 6,762,841 $ 2,562,042 _____________________ (1) See Note 2.
Commitments and Contingencies of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information relating to our short and long term material cash requirements and contractual obligations as of December 31, 2023. 111 Table of Contents Cash flows The following table summarizes our consolidated statements of cash flows (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 922,951 $ (1,585,419) $ 4,038,172 Net cash provided by (used in) investing activities 5,392 (663,822) (1,124,740) Net cash (used in) provided by financing activities (811,332) (5,838,518) 9,976,084 Net increase (decrease) in cash, cash equivalents, and restricted cash $ 117,011 $ (8,087,759) $ 12,889,516 Effect of exchange rates on cash, cash equivalents, and restricted cash $ 8,772 $ (163,257) $ (64,883) Change in customer custodial cash $ (585,666) $ (5,547,481) $ 6,762,841 Operating activities Our largest source of cash provided by operations are revenues generated from transaction fees and stablecoin revenue.
While we recognize transaction fee reversals due to transaction reversals as a reduction of net revenue, crypto asset losses due to transaction reversals are included in transaction expense. 118 Table of Contents Business combinations We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.
We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date.
The first was the depegging of $LUNA in the second quarter of 2022, which contributed to an approximately 60% crypto market capitalization decline in that quarter and exposed poor risk management practices in crypto, and ultimately helped drive the credit related bankruptcies of Three Arrows Capital, Voyager, and Celsius.
The first was the de-pegging of $LUNA which contributed to an approximately 60% crypto market capitalization decline in the second quarter of 2022 and ultimately drove the credit related bankruptcies of Three Arrows Capital, Voyager, and Celsius. The second event was the collapse of FTX in the fourth quarter of 2022, which drove additional credit related bankruptcies.
Summary of Significant Accounting Policies , of the Notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Revenue recognition We primarily generate revenue through transaction fees charged on our platform.
Summary of Significant Accounting Policies of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and significant estimates and assumptions and their effects on our financial statements.
Our staking revenue is included within blockchain rewards. Our blockchain services offered as part of Coinbase Cloud’s blockchain infrastructure solutions are included in other subscription and services revenue. • Custodial fee revenue: We derive custodial fee revenue based on a percentage of the daily value of customer crypto assets that we hold under custody in our dedicated cold storage solution.
Interest earned on customer custodial funds and loans is included in interest income within subscription and services revenue, while interest earned on our corporate cash and cash equivalents is included in corporate interest and other income, within other revenue. • Custodial fee revenue: We derive custodial fee revenue based on a percentage of the daily value of customer crypto assets that we hold under custody in our dedicated cold storage solution.
We calculate Adjusted EBITDA as net loss or income, adjusted to exclude provision for or benefit from income taxes, depreciation and amortization, interest expense, crypto asset borrowing costs, stock-based compensation expense, crypto asset impairment, net, impairment on investments, other impairment, non-recurring Direct Listing expenses, restructuring, change in unrealized foreign exchange, fair value gain or loss on derivatives , non-recurring legal reserves and related costs, and other adjustments, net. 111 Table of Contents The following table provides a reconciliation of net (loss) income to Adjusted EBITDA: Year Ended December 31, 2022 2021 2020 (in thousands) Net (loss) income $ (2,624,949) $ 3,624,120 $ 322,317 Adjusted to exclude the following: (Benefit from) provision for income taxes (439,633) (597,173) 86,882 Depreciation and amortization 154,069 63,651 30,962 Interest expense 88,901 29,160 — Crypto asset borrowing costs 6,675 11,847 2,634 Stock-based compensation 1,565,823 820,685 69,889 Crypto asset impairment, net (1) 592,495 119,421 8,355 Impairment on investments 101,445 — — Other impairment (2) 26,518 500 — Non-recurring Direct Listing expenses — 39,160 — Restructuring 40,703 — — Change in unrealized foreign exchange 28,516 (14,944) 1,057 Fair value loss (gain) on derivatives 7,410 (32,056) 5,254 Non-recurring legal reserves and related costs 64,250 1,500 — Other adjustments, net 16,379 24,200 — Adjusted EBITDA $ (371,398) $ 4,090,071 $ 527,350 ______________ (1) Crypto asset impairment, net represents impairment on crypto assets still held.
We calculate Adjusted EBITDA as net loss or income, adjusted to exclude provision for or benefit from income taxes, interest expense, depreciation and amortization, stock-based compensation expense, other impairment expense, non-recurring accrued legal contingencies, settlements, and related costs, non-recurring Direct Listing expenses, impairment on crypto assets still held, net, restructuring, fair value gain or loss on derivatives, crypto asset borrowing costs, gain on extinguishment of long-term debt, net, loss or gain on investments, net, unrealized foreign exchange gain or loss, and other adjustments, net. 106 Table of Contents The following table provides a reconciliation of net income (loss) to Adjusted EBITDA: Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) $ 94,871 $ (2,624,949) $ 3,624,120 Adjusted to exclude the following: Benefit from income taxes (171,716) (439,633) (597,173) Interest expense 82,766 88,901 29,160 Depreciation and amortization 139,642 154,069 63,651 Stock-based compensation 780,668 1,565,823 820,685 Other impairment expense 18,793 26,518 500 Non-recurring accrued legal contingencies, settlements, and related costs 15,000 64,250 1,500 Non-recurring Direct Listing expenses — — 39,160 Impairment on crypto assets still held, net 29,481 592,495 119,421 Restructuring 142,594 40,703 — Fair value (gain) loss on derivatives (41,033) 7,410 (32,056) Crypto asset borrowing costs 4,807 6,675 11,847 Gain on extinguishment of long-term debt, net (117,383) — — (Gain) loss on investments, net (20,826) 101,445 — Unrealized foreign exchange loss (gain) 17,190 28,516 (14,944) Other adjustments, net (11,200) 16,379 24,200 Adjusted EBITDA $ 963,654 $ (371,398) $ 4,090,071 Liquidity and Capital Resources We believe our existing cash and cash equivalents and USDC will be sufficient in both the short and long term to meet our requirements and plans for cash, including meeting our working capital and capital expenditure requirements.
Executive Overview This executive overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights selected information and does not contain all of the information that is important to readers of this Annual Report on Form 10-K. 2022 was a challenging year for crypto markets and our transaction revenues.
Executive Overview This executive overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights selected information and does not contain all of the information that is important to readers of this Annual Report on Form 10-K. In 2023, we paired operational excellence with product innovation to deliver a strong year of execution against our product roadmap.
Our Trading Volume in future periods will depend on the relative availability and adoption of Bitcoin, Ethereum, and other crypto assets.
In periods of high crypto asset prices and crypto asset volatility, we have experienced correspondingly high levels of Trading Volume on our platform. 91 Table of Contents Our Trading Volume in future periods will depend on the relative availability and adoption of Bitcoin, Ethereum, and other crypto assets.
Trading Volume represents the product of the quantity of asset transacted and the trade price at the time the transaction was executed. As trading activity directly impacts transaction revenue, we believe this measure is a reflection of liquidity on our order books, trading health, and the underlying growth of the cryptoeconomy.
As trading activity directly impacts transaction revenue, we believe this measure is a reflection of liquidity on our order books, trading health, and the underlying growth of the cryptoeconomy. Generally, Trading Volume on our platform is primarily influenced by the price of crypto assets, crypto asset volatility, and macroeconomic conditions.
Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates. Income taxes We utilize the asset and liability method for computing our income tax provision.
Changes in these assumptions could affect the carrying value of these assets. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.
When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to non-crypto intangible assets. These intangible assets do not have observable prices.
When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to non-crypto intangible assets. These intangible assets do not have observable prices and have primarily consisted of customer relationships, developed technology, licenses, trademarks and trade names, and non-compete agreements, which are recorded at acquisition date fair value, less accumulated amortization.
Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
A reconciliation is provided below for Adjusted EBITDA to net income (loss), the most directly comparable financial measure stated, in accordance with GAAP. Investors are encouraged to review the related GAAP financial measure and the reconciliation of Adjusted EBITDA to net income (loss), and not to rely on any single financial measure to evaluate our business.
The annual average MTUs for the years ended December 31, 2022, 2021, and 2020 were 8.8 million, 8.4 million, and 1.9 million, respectively. MTUs represent our transacting base of consumers who drive potential revenue generating transactions on our platform . MTUs engage in transactions that generate both transaction revenue and subscription and services revenue.
MTUs presented as of the end of a year represent the MTUs for the last quarter of that year. The annual average MTUs for the years ended December 31, 2023, 2022, and 2021, were 7.4 million, 8.8 million and 8.4 million, respectively. MTUs engage in transactions that generate both transaction revenue and subscription and services revenue.
We anticipate satisfying our short-term cash requirements with our existing cash and cash equivalents and may satisfy our long-term cash requirements with cash and cash equivalents on hand or with proceeds from a future equity or debt financing. 115 Table of Contents To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash and other requirements, we may be required to seek additional equity or debt financing.
To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash and other requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders.
If crypto asset prices rise, we will post additional collateral to maintain required collateral to loan ratios. We were in compliance with all collateral requirements as of December 31, 2022.
Recent downward trends in crypto asset prices have not had a material impact on the value of our corporate collateral. If crypto asset prices rise, we will post additional collateral to maintain required collateral loan ratio s. We were in compliance with all collateral requirements as of December 31, 2023.
During the years ended December 31, 2022 and 2021, no asset other than Bitcoin and Ethereum individually represented more than 10% of our Trading Volume or transaction revenue, respectively. 101 Table of Contents Components of Results of Operations Net revenue Transaction revenue Net revenue consists of transaction revenue generated from transaction fees from trades that occur on our platform.
During the year ended December 31, 2022, no asset other than Bitcoin or Ethereum individually represented more than 10% of either our Trading Volume or transaction revenue. Components of Results of Operations Revenue We generate revenue from transactions, subscription and services, and other activities.
Year Ended December 31, % Change 2022 2021 2020 2022 2021 Trading Volume (in billions): Consumer $ 167 $ 535 $ 73 (69) % 633 % Institutional 663 1,136 120 (42) 847 Total $ 830 $ 1,671 $ 193 (50) 766 Trading Volume by crypto asset: Bitcoin 29 % 24 % 41 % 21 (41) Ethereum 25 21 15 19 40 Other crypto assets 45 55 44 (18) 25 Total (1) 100 % 100 % 100 % Transaction revenue by crypto asset: Bitcoin 29 % 25 % 44 % 16 (43) Ethereum 22 21 12 5 75 Other crypto assets 49 54 44 (9) 23 Total 100 % 100 % 100 % __________________ (1) Figures presented above may not sum precisely due to rounding .
Year Ended December 31, % Change 2023 2022 2021 2023 2022 Trading Volume (in billions): Consumer $ 75 $ 167 $ 535 (55) (69) Institutional 393 663 1,136 (41) (42) Total $ 468 $ 830 $ 1,671 (44) (50) Trading Volume by crypto asset: Bitcoin 34 % 29 % 24 % 17 21 Ethereum 20 25 21 (20) 19 USDT (1) 11 nm nm nm nm Other crypto assets 35 46 55 (24) (16) Total (2) 100 % 100 % 100 % Transaction revenue by crypto asset: Bitcoin 35 % 29 % 25 % 21 16 Ethereum 17 22 21 (23) 5 Other crypto assets 48 49 54 (2) (9) Total (2) 100 % 100 % 100 % ____________________________________ nm - not meaningful (1) USDT is a stablecoin issued by Tether Operations Limited.
For the year ended December 31, 2021, we generated $7.4 billion of total net revenue, including $6.8 billion in transaction revenue. Subscription and services revenue was $792.6 million for the year ended December 31, 2022 and $517.5 million for the year ended December 31, 2021.
For the year ended December 31, 2023, our net revenue was $2.9 billion, including $1.5 billion in transaction revenue and $1.4 billion in subscription and services revenue. For the year ended December 31, 2022, our net revenue was $3.1 billion, including $2.4 billion in transaction revenue and $0.8 billion in subscription and services revenue.
We recognized $501.0 million and $43.1 million of impairment expense on our crypto asset investment portfolio for the years ended December 31, 2022 and 2021, respectively. We enter into fiat and crypto asset borrowing arrangements with certain unaffiliated institutional customers. These borrowings are generally open-term or have a term of less than one year.
We recognize d $62.8 million and $256.2 million of gross impairment expense on our crypto asset operating portfolio for the years ended December 31, 2023 and 2022 , respectively. Crypto assets borrowed and related collateral We borrow fiat and crypto assets from eligible institutional customers. These borrowings are generally open-term or have a term of less than one year.
These costs also include website hosting, infrastructure expenses, costs incurred in developing new products and services and the amortization of acquired developed technology. Sales and marketing Sales and marketing expenses primarily include costs related to customer acquisition, advertising and marketing programs, and personnel-related expenses. Sales and marketing costs are expensed as incurred.
Technology and development Technology and development expenses comprise mainly personnel-related expenses incurred in operating, maintaining, and enhancing our platform and in developing new products and services. These costs also include website hosting and infrastructure expenses, and the amortization of internally developed and acquired developed technology.
(3) During the fourth quarter of 2022, we entered into futures contracts to hedge our price exposure on crypto assets held as investments. As of December 31, 2022, the cost and fair value amounts for Bitcoin were $89.9 million and $85.8 million, respectively, and the cost and fair value amounts for Ethereum were $43.7 million and $50.8 million, respectively.
As of December 31, 2022, the cost and fair value amounts for Bitcoin were $89.9 million and $85.8 million, respectively, and the cost and fair value amounts for Ethereum were $43.7 million and $50.8 million, respectively. 109 Table of Contents Crypto assets held as investments We view our crypto asset investments as long term holdings and we do not plan to engage in regular trading of crypto assets.
See Risk Factors - Depositing and withdrawing crypto assets into and from our platform involves risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business. in Part I, Item 1A of this Annual Report on Form 10-K for further information.
See Risk Factors–Depositing and withdrawing crypto assets into and from our platform involves risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business included in Part I, Item 1A of this Annual Report on Form 10-K for further information. 110 Table of Contents Cash requirements and contractual obligations Certain jurisdictions where we operate require us 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.
While not accounted for as cash or cash equivalents, we treat our USDC holdings as a liquidity resource. 112 Table of Contents Debt In September 2021, we issued $2.0 billion in Senior Notes consisting of $1.0 billion of 2028 Senior Notes due on October 1, 2028 and $1.0 billion of 2031 Senior Notes due on October 1, 2031.
Debt In September 2021, we issued $2.0 billion in Senior Notes consisting of $1.0 billion of 2028 Senior Notes due on October 1, 2028 and $1.0 billion of 2031 Senior Notes due on October 1, 2031.
As of December 31, 2022 and 2021, no asset other than Bitcoin and Ethereum individually represented more than 10% of our Assets on Platform. 100 Table of Contents Trading Volume We define “Trading Volume” as the total U.S. dollar equivalent value of spot matched trades transacted between a buyer and seller through our platform during the period of measurement.
Trading Volume We define “Trading Volume” as the total U.S. dollar equivalent value of spot matched trades transacted between a buyer and seller through our platform during the period of measurement. Trading Volume represents the product of the quantity of assets transacted and the trade price at the time the transaction was executed.
Interest income is calculated using the interest method and depends on the balance of cash and cash equivalents as well as the prevailing interest rate environment. Operating expenses Operating expenses consist of transaction expense, technology and development, s ales and marketing, general and administrative, restructuring, and other operating expense, net.
Other revenue Other revenue includes interest income earned on our corporate cash and cash equivalents. Interest income is calculated using the interest method and depends on the balance of cash and cash equivalents as well as the prevailing interest rate environment.
As of December 31, 2022, our material cash requirements and contractual obligations due within the next 12 months and in total consisted of the following (in millions): Amounts due Next 12 Months Total Operating leases (1) $ 37.0 $ 79.5 Non-cancelable purchase obligations (2) 282.6 628.4 2026 Convertible Notes (3) Interest 7.2 24.6 Principal — 1,437.5 2028 Senior Notes (4) Interest 33.8 202.5 Principal — 1,000.0 2031 Senior Notes (4) Interest 36.3 326.3 Principal — 1,000.0 Other (5) 50.0 100.0 _______________ (1) Lease payments due for corporate offices.
As of December 31, 2023, our material cash requirements and contractual obligations arising in the normal course of business due within the next 12 months and in total consisted of the following (in thousands): Amounts Due Next 12 Months Total Operating leases (1) $ 11,235 $ 15,151 Non-cancelable purchase obligations (2) 245,011 479,226 2026 Convertible Notes (3) Interest 6,365 15,930 Principal — 1,273,013 2028 Senior Notes (4) Interest 33,750 168,750 Principal — 1,000,000 2031 Senior Notes (4) Interest 26,733 213,863 Principal — 737,457 Other (5) 10,573 10,573 Total $ 333,667 $ 3,913,963 _______________ (1) Lease payments due for corporate offices.
Accrued Expenses and Other Current Liabilities, 13. Indebtedness, 19. Income Taxes and 21.
See Notes 12. Accrued Expenses and Other Current Liabilities, 14. Indebtedness, 20. Income Taxes and 22.
Verified Users may overstate the number of unique customers who have registered an account on our platform as one customer may register for, and use, multiple accounts with different email addresses, phone numbers, or usernames. 99 Table of Contents Monthly Transacting Users We define an “MTU” as a consumer who actively or passively transacts in one or more products on our platform at least once during the rolling 28-day period ending on the date of measurement.
Monthly Transacting Users We define a Monthly Transacting User (“MTU”) as a consumer who actively or passively transacts in one or more products on our platform at least once during the rolling 28-day period ending on the date of measurement. MTUs presented for the end of a quarter are the average of each month’s MTUs in each respective quarter.
Restructuring Restructuring expenses primarily consist of non-recurring costs and severance for employees related to reductions in our headcount during the year ended December 31, 2022. For more information, see Note 3. Restructuring of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Prepaid expenses and other current and non-current assets of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for details of changes, which were material, in our strategic investments for the years ended December 31, 2023 and 2022.
In addition, Crypto Asset Volatility decreased 32% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
For the year ended December 31, 2022 as compared to 2021, Trading Volume declined primarily due to decreased crypto market capitalization, reflecting decreased average crypto asset prices in general.
(Benefit from) provision for income taxes Year Ended December 31, % Change 2022 2021 2020 2022 2021 (in thousands) (Benefit from) provision for income taxes $ (439,633) $ (597,173) $ 86,882 (26) % (787) % The benefit from income taxes decreased by $157.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 predominantly driven by a reduction in tax benefits relating to stock-based compensation and research and development credits, and a valuation allowance recorded on impairment charges, offset by an increase in tax benefit on pretax loss. 110 Table of Contents Non-GAAP Financial Measure In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance.
The benefit from income taxes decreased for the year ended December 31, 2022 as compared to 2021 primarily due to a reduction in tax benefits relating to stock-based compensation and research and development credits, and a valuation allowance recorded on impairment charges, offset by an increase in tax benefit on pretax loss.
Customer Assets and Liabilities of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information as of December 31, 2022 . As of December 31, 2022, we have not experienced excessive redemptions or withdrawals, or prolonged suspended redemptions or withdrawals, of crypto assets to date.
Income taxes of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for details of changes in our valuation allowance for the years ended December 31, 2023, 2022, and 2021.
We view our crypto asset investments as long term holdings and we do not plan to engage in regular trading of crypto assets. During times of instability in the market of crypto assets, we may not be able to sell our crypto assets at reasonable prices or at all.
From time to time, we may enter into derivatives or other financial instruments in an attempt to hedge our price exposure on our crypto assets held as investments. During times of instability in the market of crypto assets, we may not be able to sell our crypto assets at reasonable prices or at all.
For the year ended December 31, 2022, our net loss was $2.6 billion, and Adjusted EBITDA loss was $371.4 million. For the year ended December 31, 2021, our net income was $3.6 billion and Adjusted EBITDA was $4.1 billion.
For the year ended December 31, 2023, our net income was $0.1 billion and Adjusted EBITDA was $1.0 billion. For the year ended December 31, 2022, our net loss was $2.6 billion and Adjusted EBITDA was negative $0.4 billion. Beyond the numbers, we accelerated product velocity and improved our existing product suite, while laying important foundations for future growth.
Other expense (income), net Year Ended December 31, % Change 2022 2021 2020 2022 2021 (in thousands) Other expense (income), net $ 265,473 $ 20,463 $ (248) 1,197 % (8,351) % Other expense (income), net for the year ended December 31, 2022 increased by $245.0 million compared to the year ended December 31, 2021 due to the following: • an increase in net unrealized and realized losses related to foreign exchange of $61.7 million due to the timing of Euro denominated intercompany settlements and depreciation of the Euro and British Pound against the U.S. dollar; • realized losses on foreign exchange forward derivative contracts of $59.1 million; and • an increase in impairment expense recognized on certain strategic equity investments of $101.4 million; offset by • a decrease in net realized and unrealized gains on investments of $19.4 million related to gains recorded during 2021 primarily due to the remeasurement gain of $8.8 million during the year ended December 31, 2021 related to our previously held investment in Bison Trails, as a result of the acquisition that occurred in February 2021 and other investment gains of $8.1 million.
Indebtedness of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information; and • a decrease in other driven by the inclusion of a $26.9 million unrealized gain in 2023 related to fair value adjustments on certain financial instruments. 104 Table of Contents Other (income) expense, net changed for the year ended December 31, 2022, as compared to 2021, primarily due to: • an increase in net foreign exchange losses due to the timing of Euro denominated intercompany settlements and an 11% and 10% depreciation of the average exchange rates for the Euro and the British Pound, respectively, against the U.S. dollar in 2022, and realized losses on foreign exchange forward derivative contracts of $59.1 million; and • an increase in the amount of impairment expense recognized on certain strategic equity investments.
We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance.
Non-GAAP Financial Measure In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP financial measure, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes.
As of December 31, 2022 and 2021, our cash and cash equivalents, restricted cash, USDC and cash collateral balance consisted of the following (in millions): Year Ended December 31, 2022 2021 Cash and cash equivalents: Cash equivalents (1) $ 2,250.1 $ 4,813.6 Cash held at banks 2,031.7 2,141.0 Cash held at venues 143.2 168.9 Total cash and cash equivalents $ 4,425.0 $ 7,123.5 Restricted cash (2) $ 25.9 $ 31.0 USDC (3) 861.1 100.1 _________________________ (1) Cash equivalents consists of money market funds primarily denominated in U.S. dollars.
In addition, even if debt financing is available, the cost of additional financing may be significantly higher than our current debt. 107 Table of Contents Cash and cash equivalents, restricted cash, and USDC As of December 31, 2023 and 2022, our cash and cash equivalents, restricted cash, and USDC balances consisted of the following (in thousands): December 31, December 31, 2023 2022 Cash and cash equivalents: Cash equivalents (1) $ 3,682,917 $ 2,250,065 Cash held at banks 1,367,643 2,031,749 Cash held at venues (2) 88,791 143,207 Total cash and cash equivalents $ 5,139,351 $ 4,425,021 Restricted cash (3) $ 22,992 $ 25,873 USDC (4) 576,028 861,149 __________________ (1) Cash equivalents consists of money market funds denominated in U.S. dollars.
Comparison of the years ended December 31, 2022 and 2021 Revenue Year Ended December 31, % Change 2022 2021 2020 2022 2021 (in thousands) Transaction revenue $ 2,356,244 $ 6,837,266 $ 1,096,174 (66) % 524 % Subscription and services revenue 792,571 517,487 44,993 53 1,050 Other revenue 45,393 484,691 136,314 (91) 256 Total revenue $ 3,194,208 $ 7,839,444 $ 1,277,481 (59) 514 Transaction revenue for the year ended December 31, 2022 decreased by $4.5 billion compared to the year ended December 31, 2021, primarily due to the following: • a decrease in consumer Trading Volume of 69% due to a decrease in crypto market capitalization including the average crypto asset prices; and • a decline in Crypto Asset Volatility by 32%.
Comparison of the years ended December 31, 2023, 2022, and 2021 Revenue Year Ended December 31, Change 2023 2022 2023 2022 2021 $ % $ % (in thousands) (in thousands) (in thousands) Transaction revenue $ 1,519,654 $ 2,356,244 $ 6,837,266 $ (836,590) (36) $ (4,481,022) (66) Subscription and services revenue 1,406,886 792,571 517,487 614,315 78 275,084 53 Other revenue 181,843 45,393 484,691 136,450 301 (439,298) (91) Total revenue $ 3,108,383 $ 3,194,208 $ 7,839,444 $ (85,825) (3) $ (4,645,236) (59) For the years ended December 31, 2023, 2022 and 2021, we generated 88%, 84% and 81%, respectively, of total revenue in the United States.
Our income is dependent on the balance of such fiat funds and the prevailing interest rate environment. We also earn interest income on loans issued to our consumers and institutional users. Additionally, we hold customer custodial funds and cash and cash equivalents at certain third-party banks which earn interest.
Customers custodial funds balances vary depending on Trading Volume. As consumer Trading Volume increases, we generally see an increase in customer custodial funds on our platform. This revenue is also dependent on the prevailing interest rate environment. Additionally, we earn interest income on loans issued to our consumer and institutional customers.
Interest earned on cash and cash equivalents is included in corporate interest and other income, within other revenue. • Other: Other subscription and services revenue primarily includes revenue from Coinbase Cloud, which includes staking application, delegation, and infrastructure services, subscription revenue from Coinbase One, Learning Rewards (formerly “Earn”) campaign revenue, and revenue from other subscription licenses.
Our custodial fee revenue is further dependent on the fee rates we charge to our customers. • Other: Other subscription and services revenue primarily comprises revenue from: Coinbase One; Coinbase Cloud, which includes staking application, delegation, and infrastructure services; Prime Financing; and revenue from other subscription licenses.
Trading Volume decreased 50% for the year ended December 31, 2022 compared to the year ended December 31, 2021. The decrease in Trading Volume was driven by steep declines in both average crypto asset prices and total crypto spot market volumes associated with macroeconomic challenges during the year ended December 31, 2022.
The year 2022 and late 2021 saw trends of both lower crypto asset prices and a decrease of 32% in Crypto Asset Volatility for the year ended December 31, 2022 compared to 2021 driven by weaker macroeconomic conditions. Weakening market conditions were further exacerbated by two events in 2022.
You can expect us to be nimble and adapt to the market if conditions evolve outside the range of scenarios we have currently planned for. 98 Table of Contents Key Business Metrics In addition to the measures presented in our consolidated financial statements, we have historically used the key business metrics below to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions: Year Ended December 31, % Change 2022 2021 2020 2022 2021 Verified Users (in millions) 110 89 43 24 % 107 % MTUs (1) (in millions) 8.3 11.2 2.8 (26) 300 Assets on Platform (in billions) $ 80 $ 278 $ 90 (71) 209 Trading Volume (in billions) $ 830 $ 1,671 $ 193 (50) 766 Net (loss) income (in millions) $ (2,625) $ 3,624 $ 322 (172) 1,025 Adjusted EBITDA (2) (in millions) $ (371) $ 4,090 $ 527 (109) 676 ___________________ (1) We previously identified an issue in the calculation of our Monthly Transacting Users metric related to the complexity in measuring users and activity in self-custodial products (notably Coinbase Wallet) that resulted in the overstatement of the MTU figures previously disclosed as of December 31, 2021.
All told, Coinbase is a fundamentally stronger company today than a year ago, and we are in a strong financial position to capitalize on the opportunities ahead. 90 Table of Contents Key Business Metrics In addition to the measures presented in our consolidated financial statements, we use the key business metrics listed below to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions: Year Ended December 31, % Change 2023 2022 2021 2023 2022 MTUs (in millions) 7.0 8.3 11.2 (16) (26) Trading Volume (in billions) $ 468 $ 830 $ 1,671 (44) (50) Net income (loss) (in millions) $ 95 $ (2,625) $ 3,624 104 (172) Adjusted EBITDA (1) (in millions) $ 964 $ (371) $ 4,090 360 (109) ___________________ (1) See the section titled “ Non-GAAP Financial Measure ” below for a reconciliation of net income (loss) to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.
Transaction expense also includes rewards paid to users for staking activities conducted by us. Fixed-fee costs are expensed over the term of the contract and transaction-level costs are expensed as incurred. Technology and development Technology and development expenses include personnel-related expenses incurred in operating, maintaining, and enhancing our platform.
For subscription and services revenues, the primary expenses are the rewards distributed to users for staking their assets. Fixed-fee costs are expensed over the term of the contract and transaction-level costs are expensed as incurred. Our transaction expenses as a percentage of revenue will vary depending on the composition of our revenue.
See Risk Factors—We provide secured loans to our customers, which exposes us to credit risks and may cause us to incur financial or reputational harm included in Part I, Item 1A of this Annual Report on Form 10-K for further information. 114 Table of Contents As of December 31, 2022, the balance of our pledged collateral consisted of the following (in millions, except units): December 31, 2022 Units Fair Value Asset USDC 47,633,897 $ 47.6 Bitcoin 650 10.8 Fiat N/A 41.6 Total $ 100.0 As of December 31, 2021, we did not have any assets pledged as collateral recorded on the consolidated balance sheets.
As of December 31, 2023 and 2022, the balance of our assets that we have pledged as collateral on our borrowings consisted of the following (in thousands, except units): December 31, 2023 December 31, 2022 Units Fair Value Units Fair Value Asset USDC 51,879,705 $ 51,880 47,633,897 $ 47,634 Bitcoin — — 650 10,743 Fiat N/A 1,191 N/A 41,630 Total $ 53,071 $ 100,007 Our business model does not expose us to liquidity risk if we have excessive redemptions or withdrawals from customers.
Other operating expense, net for the year ended December 31, 2022 increased by $166.5 million compared to the year ended December 31, 2021, predominantly driven by the following: • an increase of $428.1 million related to gross impairment charges on crypto assets held; • an increase of $19.2 million due to certain platform-related incidents losses; and • a decrease of $137.3 million in crypto asset realized gains; offset by • a decrease of $435.4 million attributed to the decrease in the crypto assets sold in order to fulfill customer accommodation transactions, primarily as a result of a decrease in unanticipated system disruptions. 109 Table of Contents Interest expense Year Ended December 31, % Change 2022 2021 2020 2022 2021 (in thousands) Interest expense $ 88,901 $ 29,160 $ — 205 % 100 % During the year ended December 31, 2022, we had interest expense on debt of $88.9 million compared to $29.2 million for the year ended December 31, 2021.
Changes in other operating expense, net for the year ended December 31, 2022 as compared to 2021 primarily reflect: • lower customer accommodation transactions costs, as 2021 included incremental crypto assets sold as a result of unanticipated system disruptions. 103 Table of Contents There were no material changes to note within platform-related incidents and losses, gains on derivatives, and other.
Summary of Significant Accounting Polic ies - Reclassifications of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information relating to the change in customer custodial cash liabilities from operating activities to financing activities.
Restructuring of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. Other operating expense, net Other operating expense, net includes fair value gains and losses related to derivatives and derivatives designated in qualifying fair value hedge accounting relationships, as well as platform-related incidents and losses.
A number of factors contribute to changes in crypto asset prices and Crypto Asset Volatility, including, but not limited to, changes in the supply and demand for a particular crypto asset, crypto market sentiment, macroeconomic factors, utility of a particular crypto asset, and idiosyncratic events. 106 Table of Contents Subscription and services revenue for the year ended December 31, 2022 increased by $275.1 million compared to the year ended December 31, 2021, due to the following: • an increase in interest income of $301.1 million due to an increased return on our revenue sharing arrangement with the issuer of USDC and on interest-bearing customer custodial funds, driven by an increase in interest rates ; and • an increase in blockchain rewards of $52.5 million due to the addition of new assets available for staking such as Solana and Cardano in 2022 and increased staking activity primarily due to Ethereum 2 Staking which was launched in the second quarter of 2021; offset by • a decrease in custodial fee revenue of $56.4 million due to a decrease in the average assets under custody of $48.3 billion over the same period.
Subscription and services revenue increased for the year ended December 31, 2022 as compared to 2021, primarily due to: • higher stablecoin revenue attributable to higher average earned interest rates on USDC reserves, which rose 136 basis points or 969%; • an increase in blockchain rewards due to the addition of new assets available for staking; and • an increase in interest income generated on customer custodial cash attributable to higher average earned interest rates, which were up 78 basis points or 975%; offset in part by • a decrease in custodial fee revenue, primarily due to a decrease in average assets under custody of $48.3 billion, as price effects drove down the value of assets under custody.
The number of unanticipated system disruptions declined during the year ended December 31, 2022 as we continued to make significant investments in infrastructure to support trading volumes on our platform. 107 Table of Contents Operating expenses Year Ended December 31, % Change 2022 2021 2020 2022 2021 (in thousands) Transaction expense $ 629,880 $ 1,267,924 $ 135,514 (50) % 836 % Technology and development 2,326,354 1,291,561 271,732 80 375 Sales and marketing 510,089 663,689 56,782 (23) 1,069 General and administrative 1,600,586 909,392 279,880 76 225 Restructuring 40,703 — — 100 — Other operating expense, net 796,804 630,308 124,622 26 406 Total operating expenses $ 5,904,416 $ 4,762,874 $ 868,530 24 448 Transaction expense for the year ended December 31, 2022 decreased by $638.0 million, compared to the year ended December 31, 2021.
Other revenue decreased for the year ended December 31, 2022 as compared to 2021, primarily due to higher crypto asset sales in 2021 as a result of unanticipated system disruptions. 98 Table of Contents Operating expenses Year Ended December 31, Change 2023 2022 2023 2022 2021 $ % $ % (in thousands) (in thousands) (in thousands) Transaction expense $ 420,705 $ 629,880 $ 1,267,924 $ (209,175) (33) $ (638,044) (50) Technology and development 1,324,541 2,326,354 1,291,561 (1,001,813) (43) 1,034,793 80 Sales and marketing 332,312 510,089 663,689 (177,777) (35) (153,600) (23) General and administrative 1,041,308 1,600,586 909,392 (559,278) (35) 691,194 76 Crypto asset impairment, net (34,675) 722,211 153,160 (756,886) (105) 569,051 372 Restructuring 142,594 40,703 — 101,891 250 40,703 — Other operating expense, net 43,260 74,593 477,148 (31,333) (42) (402,555) (84) Total operating expenses $ 3,270,045 $ 5,904,416 $ 4,762,874 $ (2,634,371) (45) $ 1,141,542 24 There were material trends of decreased operating expenses for the year ended December 31, 2023 as compared to 2022 following increased operating expenses for the year ended December 31, 2022 as compared to 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

19 edited+15 added−6 removed8 unchanged
Biggest changeThese embedded derivative assets and liabilities are recorded on the consolidated balance sheets in accrued expenses and other current liabilities and accounts and loans receivable, net of allowance, respectively. As of December 31, 2022 and 2021, a 10% increase or decrease in the fair value of the derivative positions would not have a material impact on our financial results.
Biggest changeAs of December 31, 2023 and 2022, a 10% increase or decrease in the fair value of any of our derivative positions, individually or in the aggregate, would not have a material impact on our financial results.
We have experienced and will continue to experience fluctuations in our results of operations as a result of gains or losses on the settlement and the remeasurement of monetary assets and liabilities denominated in foreign currencies that are not the functional currency.
We have experienced and will continue to experience fluctuations in our results of operations as a result of gains or losses on the settlement and the remeasurement of monetary assets and liabilities denominated in foreign currencies that are not the functional currency of the respective entity.
If indicators of impairment exist and the estimated fair value of an investment is below the carrying amount, we will write down the investment to fair value. As of December 31, 2022 and 2021, our strategic equity investments in privately held companies were $326.7 million and $364.0 million, respectively.
If indicators of impairment exist and the estimated fair value of an investment is below the carrying amount, we will write down the investment to fair value. As of December 31, 2023 and 2022 , our strategic equity investments in privately held companies were $343.0 million and $326.7 million, respectively.
We anticipate volatility to our net income (loss) in future periods due to changes in the fair values associated with these investments and changes in observable prices and similar transactions that could impact our fair value assessments. Based on future market conditions, these changes could be material to our financial results. For more information, see Note 11.
We anticipate volatility to our net income (loss) in future periods due to changes in the fair values associated with these investments and observable price changes in similar transactions that could impact our fair value assessments. Based on future market conditions, these changes could be material to our financial results. For more information, see Notes 2.
Our foreign currency exposure is primarily related to transactions denominated in Euros and British Pounds attributable to cash and cash equivalents, customer custodial funds and customer custodial cash liabilities and other intercompany transactions where the transaction currency is different from a subsidiary’s functional currency.
Our foreign currency exposure is primarily related to transactions denominated in Euros and British Pounds attributable to cash and cash equivalents, customer custodial 117 Table of Contents funds and customer custodial cash liabilities and intercompany transactions where the transaction currency is different from a subsidiary’s functional currency.
In particular, our future profitability may depend upon the market price of Bitcoin and Ethereum, as well as other crypto assets. Crypto asset prices, along with our operating results, have fluctuated significantly from quarter to quarter. There is no assurance that crypto asset prices will reflect historical trends.
Accordingly, crypto asset price risk could adversely affect our operating results. In particular, our future profitability may depend upon the market price of Bitcoin and Ethereum, as well as other crypto assets. Crypto asset prices, along with our operating results, have fluctuated significantly. There is no assurance that crypto asset prices will reflect historical trends.
We are required to record all adjustments to the fair value of our investments through our consolidated statements of operations under other expense (income), net. During the year ended December 31, 2022, we recognized impairment expense of $101.4 million related to our strategic investments in privately held companies.
We record all adjustments to the fair value of our investments through our consolidated statements of operations under other (income) expense, net . During the years ended December 31, 2023 and 2022, we recognized impairment expense of $29.4 million and $101.4 million related to our strategic investments in privately held companies, respectively .
Goodwill, Intangible Assets, Net, and Crypto Assets Held of the Notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. 122 Table of Contents
Summary of Significant Accounting Policies and 9. Goodwill, Intangible Assets, Net, and Crypto Assets Held of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K . 119 Table of Contents
We record impairment charges on our crypto assets held when crypto asset prices decrease below the carrying value of these crypto assets . As of December 31, 2022 and 2021, a 10% decrease in crypto asset prices would not have a material impact on our impairment charges. For more information, see Note 9.
We record impairment charges on our crypto assets held when crypto asset prices decrease below the carrying value of these crypto assets . As of December 31, 2023 and 2022, a 10% decrease in crypto asset prices would not have a material impact on our financial results.
As of December 31, 2022, we had embedded derivative assets of $2.3 million and embedded derivative liabilities of $2.3 million as a result of entering into transactions to borrow crypto assets, which are recorded on the consolidated balance sheets.
As of December 31, 2023, we had embedded derivative assets and embedded derivative liabilities as a result of entering into transactions to borrow crypto assets, which are recorded on the consolidated balance sheets. We also had embedded derivative assets and embedded derivative liabilities for accounts and loans receivable and other payables denominated in crypto assets.
For more information, see Notes 2. Summary of Significant Accounting Policies , 6. Accounts and Loans Receivable, Net of Allowance , 11. Prepaid Expenses and Other Assets , 12. Accrued Expenses and Other Current Liabilities , and 14.
For more information on our derivatives and related hedges measured at fair value, see Notes 2. 118 Table of Contents Summary of Significant Accounting Policies , 6. Accounts and Loans Receivable, Net of Allowance , 11. Prepaid Expenses and Other Current and Non-Current Assets , 12. Accrued Expenses and Other Current Liabilities , and 15.
Our international operations increase our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a material impact on our future results of operations and cash flows. 120 Table of Contents Foreign currency translation risk Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars.
Foreign currency translation risk Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars.
Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction and may vary depending on payment type and the value of the transaction.
Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction and may vary depending on payment type and the value of the transaction. We also generate a large portion of our total revenue from non-transaction-based services, such as staking and custody, and such revenue has grown over time.
Interest rate risk We had cash and cash equivalents, including restricted cash and customer custodial funds, of $9.5 billion and $17.8 billion as of December 31, 2022 and 2021, respectively. Our investment policy and strategy related to our cash and cash equivalents and customer custodial funds is to preserve capital and meet liquidity requirements without increasing risk.
Our investment policy and strategy related to our cash and cash equivalents and customer custodial cash funds is to preserve capital and meet liquidity requirements without increasing risk.
We perform a qualitative assessment of our portfolio of strategic equity investments on a quarterly basis for indicators of impairment. Our analysis includes a review of operating results, credit rating, asset quality and business prospects of the investees, changes in the regulatory and macroeconomic environment, and general market conditions of the geographical area or industry in which our investees operate.
Our analysis includes a review of indicators such as: operating results when available; business prospects of the investees; changes in the regulatory and macroeconomic environment; observable price changes in similar transactions; and general market conditions of the geographical area or industry in which our investees operate.
Prepaid Expenses and Other Assets of the Notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. 121 Table of Contents Market price risk of crypto assets We generate substantially all of our total revenue from transaction fees on our platform in connection with the purchase, sale, and trading of crypto assets by our customers.
Market price risk of crypto assets We generate a large portion of our total revenue from transaction fees on our platform in connection with the purchase, sale, and trading of crypto assets by our customers.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk is the risk associated with the effect of changes in market factors on the value of the assets and liabilities held on our consolidated balance sheets, including interest rates, foreign exchange rates, prices of crypto assets, or volatilities such as market volatility or product liquidity.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Market risk is the risk to our financial statements associated with the effect of changes in market factors, including risks associated with interest rates, foreign currency, derivatives, equity investments, and crypto assets. These assets and equities are held for purposes other than trading.
A hypothetical 100 basis points increase or decrease in interest rates would have resulted in a $191.3 million and $128.1 million increase or decrease in total revenue for the years ended December 31, 2022 and 2021, respectively.
A hypothetical 500 basis points increase or decrease in average interest rates applied to daily USDC reserve balances held would have resulted in a $735.5 million increase or decrease in stablecoin revenue for the year ended December 31, 2023 and a $685.7 million increase or d ecrease in stablecoin revenue for the year ended December 31, 2022.
We recognized losses on translation adjustments, net of tax, of $35.2 million for the year ended December 31, 2022, compared to losses on translation adjustments, net of tax, of $9.7 million for the year ended December 31, 2021, in the consolidated statements of comprehensive (loss) income.
S ee the consolidated statements of comprehensive income (loss) in Part II, Item 8 of this Annual Report on Form 10-K for translation adjustments for the years ended December 31, 2023, 2022, and 2021.
Removed
Our cash and cash equivalents primarily consist of money market funds denominated in U.S. dollars and cash deposits. We also earn interest income from a revenue agreement we hold with the issuer of USDC. Changes in interest rates would primarily impact interest income due to the relatively short-term nature of our investments.
Added
Interest rate risk Our exposure to changes in interest rates primarily relates to interest earned on our cash and cash equivalents, customer custodial cash and from our arrangement with the issuer of USDC.
Removed
We recognized realized and unrealized foreign currency losses of $102.7 million for the year ended December 31, 2022, compared to net realized and unrealized foreign currency losses of $41.0 million recognized for the year ended December 31, 2021 in other expense (income), net in the consolidated statements of operations.
Added
Our cash and cash equivalents consist of money market funds denominated in U.S. dollars and cash deposits, and therefore the fair value of our cash, cash equivalents, and customer custodial funds would not be significantly affected by either an increase or a decrease in interest rates. However, the amount of interest we earn on these balances may be significantly impacted.
Removed
In the third quarter of 2022, we entered into foreign exchange forward contracts to hedge our exposure to foreign currency exchange rate risk on assets and liabilities denominated in currencies other than the functional currency.
Added
The Federal Reserve has increased the Federal Funds Rate over 500 basis points since December 31, 2021 to co ntrol current levels of inflation and as of December 31, 2023, the Federal Funds Rate was 5.33% . As a result of these significant recent increases in interest rates, a decrease in interest rates is possible.
Removed
All of our forward contracts were closed out during the fourth quarter of 2022, and as of December 31, 2022, we do not have any open contracts for foreign exchange forwards. The losses on these forward contracts were recognized in other expense (income), net in the consolidated statements of operations.
Added
A hypothetical 500 basis points increase or decrease in average interest rates applied to our average month end balances for the years ended December 31, 2023 and 2022 , which corresponds closely to the increase of the Federal Funds Rate since early 2022, would have resulted in a $307.3 million and $270.6 million increase or decrease, respectively, in interest earned on cash, cash equivalents, and customer custodial funds.
Removed
We also had an embedded derivative asset of $1.3 million, as well as an embedded derivative liability of $5.8 million for other payables denominated in crypto assets, and an embedded derivative asset of $0.3 million and an embedded derivative liability of $9.1 million for accounts and loans receivables that are denominated in crypto assets.
Added
We also earn stablecoin revenue from an arrangement with the issuer of USDC. Interest income is earned on USDC reserve balances. The issuer of USDC reported that, as of December 31, 2023, underlying reserves were held in cash, short-duration U.S. Treasuries, and overnight U.S.
Removed
We also generate total revenue from our subscription products and services and, while revenue from these products and services have not been significant to date, most of this revenue will also fluctuate based on the price of crypto assets. Accordingly, crypto asset price risk could adversely affect our operating results.
Added
Treasury repurchase agreements within segregated accounts for the benefit of USDC holders, and therefore the fair value of these balances would not be significantly affected by either an increase or a decrease in interest rates. However, the related amount of stablecoin revenue we earn may be significantly impacted.
Added
See the section titled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the years ended December 31, 2023, 2022, and 2021—Other (income) expense, net ” in Part II, Item 7 of this Annual Report on Form 10-K for a discussion of foreign exchange losses during the years ended December 31, 2023, 2022, and 2021.
Added
If an adverse 10% foreign currency exchange rate change was applied to the largest foreign currency exposure (e.g. Euro) or to all foreign currency exposures in aggregate, of monetary assets, liabilities, and commitments denominated in currencies other than its functional currency as of December 31, 2023 and 2022, it would not have a material impact on our financial results.
Added
Our international operations increase our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a material impact on our future results of operations and cash flows.
Added
As of December 31, 2023 and 2022, a 10% increase or decrease in foreign currency exchange rates used in translating the financial statements of subsidiaries with functional currencies other than our reporting currency would not have a material impact on our financial results.
Added
These embedded derivative assets and liabilities are recorded on the consolidated balance sh eets in accrued expenses and other current liabilities and accounts and loans receivable, net of allowance, respectively.
Added
S ee the section titled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of the years ended December 31, 2023, 2022, and 2021—Operating expenses—Other operating expense, net ” in Part II, Item 7 of this Annual Report on Form 10-K for a discussion of material gains and losses on derivatives during the years ended December 31, 2023, 2022, and 2021.
Added
We perform a qualitative assessment of our portfolio of strategic equity investments on a quarterly basis for indicators of impairment.
Added
Summary of Significant Accounting Policies and 11. Prepaid Expenses and Other Current and Non-Current Assets of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Added
Effective January 1, 2024 we adopted Accounting Standard Update 2023-08, Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”) which will change how we value crypto assets held, as we will be required to recognize such assets at fair value with changes recognized in net income each reporting period. For more information, see Notes 2.

Other COIN 10-K year-over-year comparisons