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What changed in Coinbase's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Coinbase's 2023 and 2024 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 2024 report.

+722 added−758 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-15)

Top changes in Coinbase's 2024 10-K

722 paragraphs added · 758 removed · 533 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

72 edited+37 added−27 removed62 unchanged
Biggest changeCoinbase 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.
Biggest changeCoinbase generates revenue from sequencer fees paid each time a transaction is processed on the Base blockchain. Coinbase Wallet Coinbase Wallet is a self-custodial wallet software product, which we offer globally. Coinbase Wallet enables users to engage and transact with the full universe of Dapps and actively engage in the onchain economy without the need for a centralized intermediary.
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.
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 certain states and foreign jurisdictions treat crypto assets under unclaimed property rules. Lending law We originate secured commercial loans in certain states in the United States.
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.
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 may 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.
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.
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 (“OFAC”), and equivalent foreign authorities.
The contents of the websites referred to above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to websites are intended to be inactive textual references only. 20
The contents of the websites referred to above are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to websites are intended to be inactive textual references only.
Their business models rely on being unregulated or only regulated in a small number of lower compliance jurisdictions, while also offering their products in highly regulated jurisdictions, including the United States, 13 without necessarily complying with the relevant regulatory requirements in such jurisdictions.
Their business models rely on being unregulated or only regulated in a small number of lower compliance jurisdictions, while also offering their products in highly regulated jurisdictions, including the United States, without necessarily complying with the relevant regulatory requirements in such jurisdictions.
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.
For Coinbase entities that provide crypto trading services, such as Coinbase, Inc., crypto assets are held in an omnibus manner on the blockchain and separately recorded using a ledger system.
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 also evaluate all other products and services prior to launch under U.S. federal and applicable international securities laws. 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 and Ethereum, fall within the definition of a “commodity” under the U.S.
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.
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 Table of Contents 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.
Custodial Practices We utilize both hot wallets and cold wallets in our custodial solutions. We actively manage wallet balances and generally seek to hold no more than 2% of custodied assets in hot wallets at any given time. Cold wallet private key materials are stored and secured at facilities within the United States and Europe.
Custodial practices We utilize both hot wallets and cold wallets in our custodial solutions. We actively manage wallet balances and generally seek to hold no more than 2% of custodied assets in hot wallets at any given time. Cold wallet private key materials are stored and secured at facilities within the United States and internationally.
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.
The CFPB has enforcement authority to prevent an entity that offers or provides consumer financial services or products 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.
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.
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 16 Table of Contents persons and inspection and examination by state regulatory agencies.
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.
Globally, we are subject to strict legal and regulatory requirements relating to the detection and prevention of terrorist financing, money laundering, fraud, tax evasion, and other illicit activity, the regulation of competition, economic, and trade sanctions, privacy, cybersecurity, information security, and data protection.
These agencies, as well as certain other governmental bodies, including state attorneys general, have broad consumer protection mandates and discretion in enforcing consumer protection laws, including matters related to unfair or deceptive, and, in the case of the CFPB, abusive acts or practices (“UDAAPs”), and they promulgate, interpret, and enforce rules and regulations that affect our business.
These agencies, as well as certain other governmental bodies, including state attorneys general, have broad consumer protection 18 Table of Contents mandates and discretion in enforcing consumer protection laws, including matters related to unfair or deceptive, and, in the case of the CFPB, abusive acts or practices (“UDAAPs”), and they promulgate, interpret, and enforce rules and regulations that affect our business.
Competition The cryptoeconomy is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and is subject to uncertain and evolving industry and regulatory requirements.
Competition The crypto industry is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and is subject to uncertain and evolving industry and regulatory requirements.
Coinbase, Inc. and Coinbase Custody Trust Company, the two subsidiaries that custody the majority of crypto assets on platform, are also periodically examined by a variety of regulators, including the New York State Department of Financial Services (“NYDFS”) and various states in which such entities hold money transmission licenses.
Coinbase, Inc. and CCTC, the two subsidiaries that custody the majority of crypto assets on platform, are also periodically examined by a variety of regulators, including the New York State Department of Financial Services (“NYDFS”) and various states in which such entities hold money transmission licenses.
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.
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; 13 Table of Contents • 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; • decentralized and non-custodial platforms; and • stablecoins, other than USDC, and fiat currencies globally.
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.
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 semi-annual pulse surveys to continuously optimize our culture, employee engagement, risk management, and productivity.
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.
When signing up for an account on our platform, among other requirements, consumer, and institutional customers must 11 Table of Contents certify that they are at least eighteen (18) years of age (if a natural person), agree to a user agreement and privacy policy, and satisfy the requirements of our robust know-your-customer (“KYC”) program.
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.
For example, in addition to robust KYC 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 Bermuda, we have obtained a ‘Class ‘F’ (Full) Digital Asset Business License from 16 the BMA enabling us to service consumer trading in numerous approved jurisdictions. In addition, we have obtained Virtual Asset Service Provider (VASP) registrations in Ireland, Spain, France, Italy and the Netherlands, through which we offer crypto custody and trading services in these countries.
In Bermuda, we have obtained a ‘Class ‘F’ (Full) Digital Asset Business License from the BMA enabling us to service consumer trading in numerous approved jurisdictions. In addition, we have obtained Virtual Asset Service Provider registrations in Argentina, Ireland, Spain, France, Italy, the Netherlands, and the United Kingdom through which we offer crypto custody and trading services in these countries.
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.
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, 2024, we had 3,772 employees.
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.
Our culture has and will continue to evolve but, at our core, we prioritize the following tenets: • Clear communication • Efficient execution • Act like an owner • Top talent • Championship team • Continuous learning • Customer focus • Repeatable innovation • Positive energy • Mission first 14 Table of Contents We are a remote-first company.
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.
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 maintain a headquarters.
In the United States, as a money services business registered with the Financial Crimes Enforcement Network (“FinCEN”), the BSA requires us to among other things, develop, implement, and maintain a risk-based anti-money laundering program, provide an anti-money laundering-related training program, report suspicious activities and transactions to FinCEN, comply with certain reporting and recordkeeping requirements, and collect and maintain information about our customers.
In the United States, as a money services business registered with the Financial Crimes Enforcement Network (“FinCEN”), we are required under the BSA to among other things, develop, implement, and maintain a risk-based anti-money laundering program, provide an anti-money laundering-related training program, report suspicious activities and transactions to FinCEN, comply with certain reporting and recordkeeping 15 Table of Contents requirements, and collect and maintain information about our customers.
We only facilitate staking of a user’s crypto assets in response to a direct instruction from that user, and they remain the property of the user while staked, and a user’s staked crypto assets remain in our custody.
We only facilitate staking of a consumer’s crypto assets in response to a direct instruction from that consumer, and the staked crypto assets remain the property of the consumer and in our custody while staked.
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.
The competitive landscape varies significantly by geography, and many offerings are global in nature. 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.
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.
Our Business We offer products and services to three customer groups: • Consumers : Retail customers seeking to invest in or trade crypto assets and engage onchain. • Institutions : Businesses that include market makers, asset managers, hedge funds, banks, wealth platforms, registered investment advisors, payment platforms, and public and private corporations. • Developers : Entrepreneurs, creators, merchants, crypto asset issuers, organizations and financial institutions, and other groups building decentralized protocols, applications, products, or other services onchain.
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 place great importance on securely storing crypto assets, and we have policies and procedures to help ensure the proper storing 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 store crypto assets using proprietary technology and operational processes.
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.
For additional information, see Risk Factors—Our failure to securely store 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 platforms involve risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business, operating results, and financial condition included in Part I, Item 1A of this Annual Report on Form 10-K.
In the event of an insurable loss of assets for which we file a claim, we may be expected to allow our insurance providers to inspect custodied assets in the course of their investigation of such claim. We do not use sub-custodians in connection with the storage of digital assets.
In the event of an insurable loss of assets for which we file a claim, we may be expected to allow our insurance providers to inspect custodied assets in the course of their investigation of such claim.
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 information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Our platform serves as a trusted and compliant gateway to the onchain economy and enables our users to engage in a wide variety of activities, including discovering, trading, staking, storing, spending, earning, and using their crypto assets in both our own proprietary and third-party product experiences enabled by access to decentralized applications.
Our platform serves as a trusted and compliant on-ramp to the onchain economy and enables our users to engage in a wide variety of activities with their crypto assets in both our own proprietary and third-party product experiences enabled by access to decentralized applications.
Other Policies and Procedures 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 platform.
We believe the terms of the relevant account agreements to be comparable to those offered to similar companies. Other policies and procedures 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 platform.
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.
We use our Investor Relations website (investor.coinbase.com), our blog (blog.coinbase.com), press releases, public conference calls and webcasts, our X feed (@coinbase), Brian Armstrong’s X feed (@brian_armstrong), our LinkedIn page, and our YouTube channel as means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Additionally, we have procedures to process redemptions and withdrawals expeditiously, subject to the terms of applicable user agreements. For additional information, see Note 10 .
Additionally, we have procedures to process redemptions and withdrawals expeditiously, subject to the terms of applicable user agreements.
NYDFS regulations impose various compliance requirements including, without limitation, operational limitations related to the nature of crypto assets we can hold under custody, capital requirements, BSA and anti-money laundering program requirements, affiliate transaction limitations, and notice and reporting requirements. Electronic money and payment institution We serve our customers through Electronic Money Institutions authorized by the U.K.
NYDFS regulations impose various compliance requirements including, without limitation, operational limitations related to the nature of crypto assets we can hold under custody, capital requirements, BSA and anti-money laundering program requirements, affiliate transaction limitations, and notice and reporting requirements.
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, as well as the bank that issues our Coinbase Card, 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.
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.
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.
A benefit of Coinbase Wallet is that consumers have sole control over their private keys and seed phrase, which are stored directly on their mobile devices or personal storage accounts and not with a centralized exchange. If a Coinbase Wallet user loses their key or seed phrase, then we are unable to assist in recovery.
A benefit of Coinbase Wallet is that consumers have sole control over their private keys and/or seed phrase, which are stored directly on their mobile devices or personal storage accounts and not with a centralized entity.
In January 2024, the Securities and Exchange Commission (the “SEC”) approved 11 spot Bitcoin ETF applications, eight of which are partnered with Coinbase. We do not charge our consumers a separate fee to safely store their crypto assets on our platform. We discuss our custodial practices for both institutions and consumers in further detail below.
In 2024, the Securities and Exchange Commission (the “SEC”) approved 11 spot Bitcoin ETF applications, nine of which partner with Coinbase, and nine Ethereum ETF applications, eight of which partner with Coinbase. We do not charge our consumers a separate fee to safely store their crypto assets on our platform.
In Australia, we are registered as a digital currency exchange provider with the Australian Transaction Reports and Analysis Centre. We are also registered as a Money Services Business with the Financial Transactions and Reports Analysis Centre of Canada.
In Australia, we are registered as a digital currency exchange provider with the Australian Transaction Reports and Analysis Centre. We are also registered as a Money Services Business with the Financial Transactions and Reports Analysis Centre of Canada, and we have registered as a Restricted Dealer by the Canadian Securities Administrators, with the Ontario Securities Commission as its Principal Regulator.
Further, we appropriately ledger, properly segregate, and maintain separate accounts for our corporate crypto assets and customers’ crypto assets. Additionally, with respect to Coinbase entities that provide cold storage custody services, such as Coinbase Custody Trust Company, LLC, crypto assets are held separately in dedicated addresses and ledgered using a proprietary combination of hardware security modules.
Additionally, with respect to Coinbase entities that provide cold storage custody services, such as Coinbase Custody Trust Company, LLC (“CCTC”) and Coinbase Custody International Limited, crypto assets are held separately in dedicated addresses and ledgered using a proprietary combination of hardware security modules.
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.
We have a digital asset support group that is composed of senior leaders from our product, legal, compliance, and finance departments. The digital asset support group 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.
In return, we earn a commission on all staking rewards received. Subject to jurisdiction, we support seven staking assets through our platform for consumers as of December 31, 2023: Cardano (ADA), Cosmos (ATOM), Polkadot (DOT), Ethereum (ETH), MATIC (POL), Solana (SOL), and Tezos (XTZ).
Subject to jurisdiction, we support eight staking assets through our platform for consumers as of December 31, 2024: Cardano (ADA), Avalanche (AVAX), Cosmos (ATOM), Polkadot (DOT), Ethereum (ETH), MATIC (POL), Solana (SOL), and Tezos (XTZ).
In accordance with applicable state money transmitter laws, we hold U.S. customers’ cash at FDIC-insured depository institutions and in money market funds in accounts explicitly named to further demonstrate that we are holding the funds as custodian. We believe the terms of the relevant account agreements to be comparable to those offered to similar companies.
In accordance with applicable state money transmitter laws, we hold U.S. customers’ cash at FDIC-insured depository institutions, NCUSIF-insured credit unions, and in money market funds in accounts explicitly named to further demonstrate that we are 12 Table of Contents holding the funds as custodian.
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.
ITEM 1. BUSINESS Coinbase Overview Our mission is to increase ec onomic 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.
As of December 31, 2023, approximately $9.4 billion worth of these assets were held on behalf of individual consumers staked through our platform, as adjusted to USD. We also support staking of additional assets for our institutional customers.
As of December 31, 2024, approximately $15.2 billion worth of these assets were held on behalf of individual consumers staked through our platform, as adjusted to USD. For our institutional customers, our staking process varies by customer.
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.
We also provide critical infrastructure for the onchain economy and support builders who share our vision of bringing the world onchain. Onchain activities are interactions with the blockchain that take place in a broad category of blockchain-powered technologies, including self-custody wallets, decentralized apps and services, and open community engagement platforms.
Additionally, as a U.S. public company, we are required to undergo annual audits and quarterly reviews, which, among other things, require that our independent registered public accounting firm reviews and audits our crypto reserves, internal controls, and reconciliation processes.
Additionally, as a U.S. public company, we are required to undergo annual audits and quarterly reviews, which, among other things, require that our independent registered public accounting firm reviews and audits our internal controls and reconciliation processes. Moreover, our various user, custody, and client agreements outline the applicability of Uniform Commercial Code (“UCC”) Article 8 to custodied crypto assets.
In addition to operating our own validator nodes to provide staking services, we utilize third-party service providers to operate validator nodes on our customers’ behalf. 9 Because staking rewards depend on the relevant protocol and network conditions, the estimated rewards rate for each asset made available for staking is displayed on our website and through our platform, and is calculated by periodically consulting onchain data to determine the total amount earned by our stakers.
Because staking rewards depend on the relevant protocol and network conditions, the estimated rewards rate for each asset made available for staking is displayed on our website and through our platform, and is calculated by periodically consulting onchain data to determine the total amount.
According to certain protocol rules, staked crypto assets cannot be sold or transferred while they remain staked, and we do not use or allocate users’ staked crypto assets for any other purpose. Custody We offer consumer and institutional customers a variety of custodial solutions underpinning our product offerings.
According to certain protocol rules, staked crypto assets cannot be sold or transferred while they remain staked, and we do not use or allocate consumers’ staked crypto assets for any other purpose.
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.
Prime Trading Coinbase Prime is our full-service prime brokerage platform, where our institutional customers can access deep pools of liquidity across a network of trading venues. 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.
In addition, we have obtained a BitLicense from NYDFS.
In addition, we have obtained a BitLicense from NYDFS and a Virtual Currency Business License from Louisiana.
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.
Only the digital asset support group 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.
Financial Conduct Authority and the Central Bank of Ireland. We comply with rules and regulations applicable to the European e-money industry, including those related to funds safeguarding, corporate governance, anti-money laundering, disclosure, reporting, and inspection. We are, or may be, subject to banking-related regulations in other countries now or in the future related to our role in the financial industry.
Electronic money and payment institution We serve our customers through Electronic Money Institutions authorized by the U.K. Financial Conduct Authority and the Central Bank of Ireland. We comply with rules and regulations applicable to the European e-money industry, including those related to funds safeguarding, corporate governance, anti-money laundering, disclosure, reporting, and inspection.
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.
As regulations and compliance requirements in the United States become clearer, we may face increased competition from U.S.-based companies. 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.
Crypto assets are not insured or guaranteed by any government or government agency, however we have worked hard to safeguard our customers’ crypto assets and our own crypto assets for investment and operational purposes with legal and operational protections. Similarly, for customers who participate in our staking program, their staked assets remain their assets.
Crypto assets are not insured or guaranteed by any government or government agency; however, we have worked hard to securely store our customers’ crypto assets and our own crypto assets for investment and operational purposes with legal and operational protections. Further, we appropriately ledger, properly segregate, and maintain separate accounts for our corporate crypto assets and customers’ crypto assets.
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.
Simple trading focuses on consumers of all experience levels who are prioritizing ease of use. • Advanced trade : Our advanced trading experience offers traders access to spot and derivatives order books, real-time market information through interactive charts, a live trade history on the advanced trade view, and other trading tools.
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.
We are, or may be, subject to banking-related regulations in other countries now or in the future related to our role in the financial industry. New York State trust company Our subsidiary, CCTC, operates as a New York State-chartered limited purpose trust company, which is subject to regulation, examination, and supervision by the NYDFS.
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.
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 and Ethereum ETF issuers.
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.
We offer two trading experiences: • Simple trade : Our simple trading experience offers customers the ability to buy, sell, and convert crypto assets using the basic interface of our platform, and includes value-added services such as fixed price quotes and recurring trades.
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.
Throughout this Annual Report on Form 10-K, we will refer to our full suite of products and offerings as our platform or platforms. Transaction products 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.
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.
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. New customers must meet some minimum criteria to engage on our platforms.
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.
Certain blockchain protocols, such as Ethereum and Solana, rely on staking to validate blockchain transactions, an essential operation to these protocols’ operations and an alternative consensus mechanism to mining. Network participants can designate a certain amount of their crypto assets on the network to validate transactions and earn rewards.
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.
We offer integrated financing products and services to institutional customers that meet our credit criteria to access liquidity for their hedging, trading, and working capital needs.
A number of enforcement actions and regulatory proceedings have since been initiated against digital assets and digital asset products and their developers and proponents, as well as against trading platforms that support digital assets. Several foreign governments have also issued similar warnings cautioning that digital assets may be deemed to be securities under the laws of their jurisdictions.
A number of enforcement actions and regulatory proceedings have since been initiated against digital assets and digital asset products, as well as against trading platforms that support digital assets. The SEC has characterized a number of crypto assets, products, and services as securities in these regulatory proceedings and enforcement actions, including an enforcement action brought against us.
I n August 2023, we entered into an updated arrangement with the issuer of USDC to (i) support USDC, a stablecoin redeemable on a one-to-one basis for U.S. dollars; (ii) help drive long-term success of the stablecoin ecosystem; and (iii) continue to generate revenue through means other than transaction fees.
In August 2023, we entered into an updated arrangement with Circle to (i) support USDC; (ii) help drive long-term success of the stablecoin ecosystem; and (iii) share in the economics of the reserves backing stablecoins in circulation both on and off our platform (the “Circle Agreement”).
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. 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.
We have seen an increase in the rate of assets created and increased demand for listings, and we continue to evaluate our processes to meet this increased demand. 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.
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.
Today, many users choose to outsource the technical processes involved in staking by staking through a service provider. We provide an onchain staking service, which allows our customers to stake their assets with a few clicks. Our customers maintain full ownership of their crypto assets while earning staking rewards.
As of December 31, 2023, over $7.4 billion worth of assets were staked by institutional customers through Coinbase Prime, as adjusted to USD.
As of December 31, 2024, over $8.1 billion worth of assets were staked by institutional customers through Coinbase Prime, as adjusted to USD. We also operate a cbETH token wrapping service. cbETH is an Ethereum-based “wrapped staking token” that represents ownership of ETH staked through our platform.
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.
Coinbase Developer Platform enables developers to build crypto into their products faster and to simplify how they interact with blockchains. Trusted crypto platform Coinbase is the most trusted crypto platform.
Removed
Our 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.
Added
Together with the crypto community, we advocate for responsible rules to make the benefits of crypto available around the world. We differentiate ourselves from our competition with: • Trust : We are deeply invested in building the most secure and compliant platform. We hold customer assets one-to-one at all times.
Removed
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.
Added
We do not act on customer assets, including staking, lending, rehypothecating, or engaging in fractional reserve banking, without customer consent. • Ease of use : We strive to build products that are easy to use and that our customers love. We obsess over quality and craft in our products. We strive to make buying, storing, and using crypto easy.
Removed
These markets generate revenue by charging a transaction fee for executed trades. Coinbase continues to gain traction in regulated derivatives as we continue to expand our offerings. For example, in September 2023, we secured regulatory approval from the Bermuda Monetary Authority (the “BMA”) to enable perpetual futures for eligible non-U.S. customers through the Coinbase International Exchange.
Added
Our business consists of 7 Table of Contents products that we monetize through transaction fees, such as our consumer trading product suite, as well as subscription products and services, such as our stablecoin products. We describe these products below.
Removed
Ecosystem Products We also offer a suite of products and other services that are key parts of the crypto ecosystem. Stablecoins As part of our effort to update the financial system, we are focused on growing the stablecoin ecosystem.
Added
Advanced trading focuses on sophisticated traders who are prioritizing a robust set of features to meet their more complex needs and higher volume. We generate fees from consumers trading on our platform, including through volume-based transaction fees and a spread depending on the type of trade.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur operating results will continue to fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including: • our dependence on offerings that are dependent on crypto asset trading activity, including trading volume and the prevailing trading prices for crypto assets, whose trading prices and volume can be highly volatile; • our ability to attract, maintain, and grow our customer base and engage our customers; • changes in the legislative or regulatory environment, or actions by U.S. or foreign governments or regulators, including fines, orders, or consent decrees; • regulatory changes or scrutiny that impact our ability to offer certain products or services; • our ability to continue to diversify and grow our subscription and services revenue; • our mix of revenue between transaction and subscription and services; • pricing for or temporary suspensions of our products and services; • investments we make in the development of products and services as well as technology offered to our developers, international expansion, and sales and marketing; • adding crypto assets to, or removing from, our platform; • our ability to establish and maintain partnerships, collaborations, joint ventures, or strategic alliances with third parties; • market conditions of, and overall sentiment towards, the cryptoeconomy; • macroeconomic conditions, including interest rates, inflation and instability in the global banking system; 21 • adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceeding and enforcement-related costs; • the development and introduction of existing and new products and services by us or our competitors; • our ability to control costs, including our operating expenses incurred to grow and expand our operations and to remain competitive; • system failure, outages or interruptions, including with respect to our crypto platform and third-party crypto networks; • our lack of control over decentralized or third-party blockchains and networks that may experience downtime, cyber-attacks, critical failures, errors, bugs, corrupted files, data losses, or other similar software failures, outages, breaches and losses; • breaches of security or privacy; • inaccessibility of our platform due to our or third-party actions; • our ability to attract and retain talent; and • our ability to compete with our competitors.
Biggest changeOur operating results will continue to fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of our control, including: • crypto asset trading activity, including trading volume and the prevailing trading prices for crypto assets, which can be highly volatile; • our ability to attract, maintain, grow, and engage our customer and developer base; • changes in the legislative or regulatory environment, or actions by U.S. or foreign governments or regulators, including fines, orders, or consent decrees; • regulatory changes or scrutiny that impact our ability to offer certain products or services; • our ability to continue to diversify and grow our subscription and services revenue; • our mix of revenue between transaction and subscription and services; • pricing for or temporary suspensions of our products and services; • adding crypto assets to, or removing from, our platform; • our ability to establish and maintain partnerships, collaborations, joint ventures, or strategic alliances with third parties; • market conditions of, and overall sentiment towards, the cryptoeconomy; • macroeconomic conditions, including interest rates, inflation, and instability in the global banking system; • adverse legal proceedings or regulatory enforcement actions, judgments, settlements, or other legal proceedings, and enforcement-related costs; • the development and introduction of existing and new products and services by us or our competitors; • the amount and timing of our operating expenses related to the maintenance and expansion of our business and operations, including investments we make in the development of products and services, as well as technology offered to our developers, international expansion, and sales and marketing; • system failures, outages or interruptions, including with respect to our platform and third-party crypto networks; 21 Table of Contents • our lack of control over decentralized or third-party blockchains and networks that may experience downtime, cyberattacks, critical failures, errors, bugs, corrupted files, data losses, or other similar software failures, outages, breaches and losses; • breaches of security or privacy; • inaccessibility of our platform due to our or third-party actions; • our ability to attract and retain talent; and • our ability to compete with our competitors.
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.
We also generate a large portion of total revenue from our subscription and services, and such revenue has grown over time, primarily due to growth in stablecoin revenue 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.
Counterparties to any strategic relationship may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals, and may subject us to additional risks to the extent such third party becomes the subject of negative publicity, faces its own litigation or regulatory challenges, or faces other adverse circumstances.
Counterparties to any strategic relationship may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals, and may subject us to additional risks to the extent any such third party becomes the subject of negative publicity, faces its own litigation or regulatory challenges, or faces other adverse circumstances.
As a result, there may be a lack of consensus or clarity on the governance of any particular crypto network, a lack of incentives for developers to maintain or develop the network, and other unforeseen issues, any of which could result in unexpected or undesirable errors, bugs, or changes, or stymie such network’s utility and ability to respond to challenges and grow; and • many crypto networks are in the early stages of developing partnerships and collaborations, all of which may not succeed and adversely affect the usability and adoption of the respective crypto assets.
As a result, there may be a lack of consensus or clarity on the governance of any particular crypto network, a lack of incentives for developers to maintain or develop the network, and other unforeseen issues, any of which could result in unexpected or undesirable errors, bugs, or changes, or stymie such network’s utility and ability to respond to challenges and grow; and • many crypto networks are in the early stages of developing partnerships and collaborations, any or all of which may not succeed and adversely affect the usability and adoption of the respective crypto assets.
In addition, we are required to comply with laws and regulations related to economic sanctions and export controls enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S.
In addition, we are required to comply with laws and regulations related to economic sanctions and export controls enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S.
Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brand and business, and adversely affect our operating results and financial condition.
Any of the foregoing could, individually or in the aggregate, harm our reputation, damage our brand, and adversely affect our business, operating results, and financial condition.
The SEC has also recently brought enforcement actions and entered into settlements with numerous cryptoeconomy participants alleging that certain digital assets are securities, including the June 2023 Complaint. These statements, framework and enforcement actions are not rules or regulations of the SEC and are not binding on the SEC.
The SEC has also recently brought enforcement actions and entered into settlements with numerous cryptoeconomy participants alleging that certain digital assets are securities, including the June 2023 SEC Complaint. These statements, framework and enforcement actions are not rules or regulations of the SEC and are not binding on the SEC.
Key business metrics and other estimates are subject to inherent challenges in measurement and to change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.
Key business metrics and other estimates are subject to inherent challenges in measurement and change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.
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.
There can be no assurance that the IRS, 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.
These risks and challenges include: • difficulty establishing and managing international operations and the increased operations, travel, infrastructure, including establishment of local customer service operations, local infrastructure to manage supported cryptocurrency or other financial instruments and corresponding books and records, and legal and regulatory compliance costs associated with different jurisdictions; • the need to vary pricing and margins to effectively compete in international markets; • the need to adapt and localize our products and services for specific countries, including offering services and support in local languages; • compliance with multiple, potentially conflicting and changing governmental laws and regulations across different jurisdictions; • compliance with U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities, as well as economic and trade sanctions; • the need to comply with a greater set of law enforcement inquiries including those subject to mutual legal assistance treaties; • compliance with the extraterritorial reach of any U.S. regulatory rules, including those imposed by the CFTC, SEC, FinCEN or other U.S. based regulators; • difficulties obtaining and maintaining required licensing from regulators in foreign jurisdictions; 48 • competition with companies that have greater experience in the local markets, pre-existing relationships with customers in these markets or are subject to less regulatory requirements in local jurisdictions; • varying levels of payments and blockchain technology adoption and infrastructure, and increased network, payment processing, banking, and other costs; • compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act, the U.K.
These risks and challenges include: • difficulty establishing and managing international operations and the increased operations, travel, infrastructure, including establishment of local customer service operations, local infrastructure to manage supported cryptocurrency or other financial instruments and corresponding books and records, and legal and regulatory compliance costs associated with different jurisdictions; • the need to vary pricing and margins to effectively compete in international markets; • the need to adapt and localize our products and services for specific countries, including offering services and support in local languages; • compliance with multiple, potentially conflicting and changing governmental laws and regulations across different jurisdictions; • compliance with U.S. and foreign laws designed to combat money laundering and the financing of terrorist activities, as well as economic and trade sanctions; • the need to comply with a greater set of law enforcement inquiries including those subject to mutual legal assistance treaties; • compliance with the extraterritorial reach of any U.S. regulatory rules, including those imposed by the CFTC, SEC, FinCEN or other U.S. based regulators; • difficulties obtaining and maintaining required licensing from regulators in foreign jurisdictions; • competition with companies that have greater experience in the local markets, pre-existing relationships with customers in these markets or are subject to less regulatory requirements in local jurisdictions; • varying levels of payments and blockchain technology adoption and infrastructure, and increased network, payment processing, banking, and other costs; • compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act, the U.K.
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.
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, 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 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).
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).
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.
Any number of factors can negatively affect customer retention, growth, and engagement, including if: 45 Table of Contents • 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, 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 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.
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 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.
The price and trading volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of factors, including: • market conditions of, and overall sentiment towards, crypto assets and the cryptoeconomy, including, but not limited to, as a result of actions taken by or developments of other companies in the cryptoeconomy; • changes in liquidity, market-making volume, and trading activities; • trading activities on other crypto platforms worldwide, many of which may be unregulated, and may include manipulative activities; • investment and trading activities of highly active consumer and institutional users, speculators, miners, and investors; • the speed and rate at which crypto is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial assets worldwide, if at all; • decreased user and investor confidence in crypto assets and crypto platforms; • negative publicity and events relating to the cryptoeconomy; • unpredictable social media coverage or “trending” of, or other rumors and market speculation regarding, crypto assets; • the ability for crypto assets to meet user and investor demands; • the functionality and utility of crypto assets and their associated ecosystems and networks, including crypto assets designed for use in various applications; • consumer preferences and perceived value of crypto assets and crypto asset markets; • increased competition from other payment services or other crypto assets that exhibit better speed, security, scalability, or other characteristics; • adverse legal proceedings or regulatory enforcement actions, judgments, or settlements impacting cryptoeconomy participants; • regulatory or legislative changes, scrutiny and updates affecting the cryptoeconomy; • the characterization of crypto assets under the laws of various jurisdictions around the world; • the adoption of unfavorable taxation policies on crypto asset investments by governmental entities; • the maintenance, troubleshooting, and development of the blockchain networks underlying crypto assets, including by miners, validators, and developers worldwide; • the ability for crypto networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently; 23 • legal and regulatory changes affecting the operations of miners and validators of blockchain networks, including limitations and prohibitions on mining activities, or new legislative or regulatory requirements as a result of growing environmental concerns around the use of energy in Bitcoin and other proof-of-work mining activities; • ongoing technological viability and security of crypto assets and their associated smart contracts, applications and networks, including vulnerabilities against hacks and scalability; • fees and speed associated with processing crypto asset transactions, including on the underlying blockchain networks and on crypto platforms; • financial strength of market participants; • the availability and cost of funding and capital; • the liquidity and credit risk of other crypto platforms; • interruptions or temporary suspensions or other compulsory restrictions in products or services from or failures of major crypto platforms; • availability of an active derivatives market for various crypto assets; • availability of banking and payment services to support crypto-related projects; • instability in the global banking system and the level of interest rates and inflation; • monetary policies of governments, trade restrictions, and fiat currency devaluations; and • national and international economic and political conditions.
The price and transaction volume of any crypto asset is subject to significant uncertainty and volatility, depending on a number of factors, including: • market conditions of, and overall sentiment towards, crypto assets and the cryptoeconomy, including, but not limited to, as a result of actions taken by or developments of other companies in the cryptoeconomy; • changes in liquidity, market-making volume, and trading activities; • trading activities on other crypto platforms worldwide, many of which may be unregulated, and may include manipulative activities; 22 Table of Contents • investment and trading activities of highly active consumer and institutional users, speculators, miners, and investors; • the speed and rate at which crypto is able to gain adoption as a medium of exchange, utility, store of value, consumptive asset, security instrument, or other financial assets worldwide, if at all; • decreased user and investor confidence in crypto assets and crypto platforms; • negative publicity and events relating to the cryptoeconomy; • unpredictable social media coverage or “trending” of, or other rumors and market speculation regarding, crypto assets; • the ability for crypto assets to meet user and investor demands; • the functionality and utility of crypto assets and their associated ecosystems and networks, including crypto assets designed for use in various applications; • consumer preferences and perceived value of crypto assets and crypto asset markets; • increased competition from other payment services or other crypto assets that may exhibit better speed, security, scalability, or other characteristics; • adverse legal proceedings or regulatory enforcement actions, judgments, or settlements impacting cryptoeconomy participants; • regulatory or legislative changes, scrutiny and updates affecting the cryptoeconomy; • the characterization of crypto assets under the laws of various jurisdictions around the world; • the adoption of unfavorable taxation policies on crypto asset investments by governmental entities; • the maintenance, troubleshooting, and development of the blockchain networks underlying crypto assets, including by miners, validators, and developers worldwide; • the ability for crypto networks to attract and retain miners or validators to secure and confirm transactions accurately and efficiently; • legal and regulatory changes affecting the operations of miners and validators of blockchain networks, including limitations, and prohibitions on mining activities, or new legislative or regulatory requirements as a result of growing environmental concerns around the use of energy in Bitcoin and other proof-of-work mining activities; • ongoing technological viability and security of crypto assets and their associated smart contracts, applications and networks, including vulnerabilities against hacks and scalability; • speed and fees associated with processing crypto asset transactions, including on the underlying blockchain networks and on crypto platforms; • financial strength of market participants; • the availability and cost of funding and capital; • the liquidity and credit risk of other crypto platforms and other participants of the cryptoeconomy; • interruptions or temporary suspensions or other compulsory restrictions in products or services from or failures of major crypto platforms; • availability of an active derivatives market for various crypto assets; • availability of banking and payment services to support crypto-related projects; • instability in the global banking system and the level of interest rates and inflation; • monetary policies of governments, trade restrictions, and fiat currency devaluations; and 23 Table of Contents • national and international economic and political conditions.
If we were to modify or discontinue any product offering or service or remove any assets from trading on our platform for any reason, our decision may be unpopular with users, may reduce our ability to attract and retain customers (especially if similar products, services or such assets continue to be offered or traded on unregulated exchanges, which includes many of our competitors), and may adversely affect our business, operating results, and financial condition.
If we were to modify or discontinue any product offering or service or remove any assets from trading on our platform for any reason, our decision may be unpopular with users, may reduce our ability to attract and retain customers (especially if similar products, services or such assets continue to be offered or traded on unregulated exchanges, which includes many of our competitors), and could adversely affect our business, operating results, and financial condition.
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.
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: 36 Table of Contents • 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. 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.
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.
Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or crypto companies, whether or not we are directly impacted, could lead to a general loss of customer confidence in the cryptoeconomy or in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures 28 and technology infrastructure.
Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or crypto companies, whether or not we are directly impacted, could lead to a general loss of customer confidence in the cryptoeconomy or in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures and technology infrastructure.
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.
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.
A particular crypto asset, product or service’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset or product offering, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition.
A particular crypto asset, product or service’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset or product offering, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which could adversely affect our business, operating results, and financial condition.
While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement at the time of reporting, there are inherent challenges in such measurements. If we fail to maintain an effective analytics platform, our key metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.
While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement at the time of reporting, there are inherent challenges in such measurements. If we fail to maintain an effective analytics platform, our key business metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies.
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.
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 addition, over the last several years, the Organization for Economic Cooperation and Development has been working on a Base Erosion and Profit Shifting Project that, if implemented, would change various aspects of the existing framework under which our tax obligations 76 are determined in many of the countries in which we do business.
In addition, over the last several years, the Organization for Economic Cooperation and Development has been working on a Base Erosion and Profit Shifting Project that, if implemented, would change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.
We are currently subject to stockholder litigation and in June 2023 the SEC filed the June 2023 SEC Complaint, as described in the section titled “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K, and may continue to be the target of these types of actions or additional regulatory uncertainty and scrutiny in the future.
We are currently subject to stockholder litigation and the June 2023 SEC Complaint, as described in the section titled “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K , and may continue to be the target of these types of actions or additional regulatory uncertainty and scrutiny in the future.
(federal and state) and foreign tax laws which could further limit our ability to fully utilize these tax assets against future taxable income. Under the Inflation Reduction Act, our ability to utilize tax deductions or losses from prior years may be limited by the imposition of the 15% minimum tax if, in future years, such minimum tax applies to us.
(federal and state) and foreign tax laws which could further limit our ability to fully utilize these tax assets against future taxable income. Under the Inflation Reduction Act, our ability to utilize tax deductions or losses from prior years may be limited by the imposition of the 15% minimum tax if such minimum tax applies to us.
However, our ability to grow our customer base and net revenue will depend heavily on our ability to innovate and create successful new products and services, both independently and in conjunction with third-party developers. In particular, developing and incorporating new products and services into our business may require 37 substantial expenditures, take considerable time, and ultimately may not be successful.
However, our ability to grow our customer base and net revenue will depend heavily on our ability to innovate and create successful new products and services, both independently and in conjunction with third-party developers. In particular, developing and incorporating new products and services into our business may require substantial expenditures, take considerable time, and ultimately may not be successful.
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.
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.
Conversely, when interest rates increase, investors may choose to shift their asset allocations, which could negatively impact our stock price or the cryptoeconomy more generally. 26 The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate.
Conversely, when interest rates increase, investors may choose to shift their asset allocations, which could negatively impact our stock price or the cryptoeconomy more generally. The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate.
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.
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.
In addition, some crypto networks require additional information to be provided in connection with any transfer of crypto assets to or from our platforms. A number of errors can occur in the process of depositing or withdrawing crypto assets into or from our platform, such as typos, mistakes, or the failure to include the information required by the blockchain network.
In addition, some crypto networks require additional information to be provided in connection with any transfer of crypto assets to or from our platforms. A number of errors can occur in the process of depositing or withdrawing crypto assets into or from our platforms, such as typos, mistakes, or the failure to include the information required by the blockchain network.
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.
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.
Additionally, privacy and data protection laws are evolving, and these laws may be interpreted and applied in a manner that is inconsistent with our data handling safeguards and practices that could result in fines, lawsuits, and other penalties, and significant changes to our or our 66 third-party partners’ business practices and products and service offerings.
Additionally, privacy and data protection laws are evolving, and these laws may be interpreted and applied in a manner that is inconsistent with our data handling safeguards and practices that could result in fines, lawsuits, and other penalties, and significant changes to our or our third-party partners’ business practices and products and service offerings.
If such a market condition were to become widespread in the cryptoeconomy, we could suffer from increased counterparty risk, including defaults or bankruptcies of major customers or counterparties, which could lead to significantly reduced activity on our platform 74 and fewer available crypto market opportunities in general.
If such a market condition were to become widespread in the cryptoeconomy, we could suffer from increased counterparty risk, including defaults or bankruptcies of major customers or counterparties, which could lead to significantly reduced activity on our platform and fewer available crypto market opportunities in general.
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.
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.
This is important both to the actual controls and processes and the public perception of the same. Any inability by us to maintain our safeguarding procedures, perceived or otherwise, could harm our business, operating results, and financial condition. Accordingly, we take steps to ensure customer cash is always secure.
This is important both to the actual controls and processes and the public perception of the same. Any inability by us to maintain our procedures, perceived or otherwise, could harm our business, operating results, and financial condition. Accordingly, we take steps to ensure customer cash is always secure.
Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline. 82 If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and its liquidity could decline.
Any such issuance could result in substantial dilution to our existing stockholders and cause the market price of our Class A common stock to decline. If securities or industry analysts do not publish or cease publishing research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and its liquidity could decline.
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.
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.
We rely on, and expect to continue to rely on, a combination of trademark, trade dress, domain name, copyright, and trade secrets, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.
We rely on, and expect to continue to rely on, a combination of trademark, trade dress, patents, domain name, copyright, and trade secrets, as well as confidentiality and license agreements with our employees, contractors, consultants, and third parties with whom we have relationships, to establish and protect our brand and other intellectual property rights.
Geopolitical developments, such as trade wars and foreign exchange limitations can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and crypto asset markets. For example, the capital and credit markets have experienced extreme volatility and disruptions, resulting in steep declines in the value of crypto assets.
Geopolitical developments, such as trade wars and foreign exchange limitations can also increase the severity and levels of unpredictability globally and increase the volatility of global financial and crypto asset markets. For example, in the past the capital and credit markets have experienced extreme volatility and disruptions, resulting in steep declines in the value of crypto assets.
There are also inherent security weaknesses in some crypto assets, such as when creators of certain crypto networks use procedures that could allow hackers to counterfeit tokens. Any weaknesses identified with a crypto asset could adversely affect its price, security, liquidity, and adoption.
There are also inherent security weaknesses in some crypto assets, such as when creators of certain crypto networks use procedures that could allow hackers to counterfeit tokens. Any weaknesses identified with a crypto asset could adversely affect its price, security, liquidity, and adoption rate.
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.
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 growth of our revenue in any given prior quarterly or annual period as an indication of our future performance.
We may be unable to attain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including each series of the 2026 Convertible Notes and Senior Notes, and other obligations.
We may be unable to attain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including each series of the 2026 Convertible Notes, 2030 Convertible Notes, and Senior Notes, and other obligations.
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.
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.
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.
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.
Alternatively, we may determine not to remove a particular crypto asset from Coinbase Spot Market or to continue to offer a product or service on our platform even if the SEC or another regulator alleges that the crypto asset, product or service is a security, pending a final judicial determination as to that crypto asset, product or service’s proper characterization, and the fact that we waited for a final judicial determination would generally not preclude penalties or sanctions against us for our having previously made our platform available for trading that crypto asset or offering that product or service on our platform without registering as a national securities exchange or ATS or registering tokens that we may issue, such as our cbETH token or our staking services, with the SEC.
Alternatively, we may determine not to remove a particular crypto asset from Coinbase Spot Market or to continue to offer a product or service on our platform even if the SEC or another regulator alleges that the crypto asset, product or service is a security, pending a final judicial determination as to that crypto asset, product or service’s proper characterization, and the fact that we waited for a final judicial determination would generally not preclude penalties or sanctions against us for our having previously made our platform available for trading that crypto asset or offering that product or service on our platform without registering as a national securities exchange or ATS or registering tokens that we may issue, such as our cbETH and cbBTC tokens or our staking services, with the SEC.
As a result, we expect to incur significant costs and expenses to develop and upgrade our technical infrastructure to meet the evolving needs of the industry. Our success will depend on our ability to develop and incorporate new offerings and adapt to technological changes and evolving industry practices.
As a result, we expect to incur significant costs and expenses to develop and upgrade our technical infrastructure to meet the evolving needs of the industry. Our success will depend on our ability to develop, scale, and incorporate new offerings and adapt to technological changes and evolving industry practices.
In some cases, the costs of such acquisitions may be substantial, and there is no assurance that we will receive a favorable return on investment for our acquisitions. We may in the future be required to write off acquisitions or investments.
In some cases, the costs of such acquisitions and investments may be substantial, and there is no assurance that we will receive a favorable return on investment for our acquisitions and investments. We have and may in the future be required to write off acquisitions or investments.
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.
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, and other crypto asset incentives and products that we offer.
Any inaccuracy in the third-party data we use could cause us to overstate or understate our key metrics. We regularly review our processes for calculating these metrics, and from time to time we make adjustments to improve their accuracy.
Any inaccuracy in the third-party data we use could cause us to overstate or understate our key business metrics. We regularly review our processes for calculating these metrics, and from time to time we make adjustments to improve their accuracy.
We have policies and procedures to analyze whether each crypto asset that we seek to facilitate trading of on Coinbase Spot Market, as well as our products and services, could be deemed to be a “security” under applicable laws.
We have policies and procedures to analyze whether each crypto asset that we seek to facilitate trading on Coinbase Spot Market , as well as our products and services, could be deemed to be a “security” under applicable laws.
A relatively small number of institutional market makers and high-transaction volume consumer customers account for a significant amount of the Trading Volume on our platform and our net revenue. We expect significant Trading Volume and net revenue attributable to these customers for the foreseeable future.
A relatively small number of institutional market makers and high-transaction volume consumer customers account for a significant amount of the Trading Volume on our platform and our net revenue. We expect significant Trading Volume and net revenue attributable to these users for the foreseeable future.
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.
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.
As crypto assets have grown in both popularity and market size, various U.S. federal, state, and local and foreign governmental organizations, consumer agencies and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and the safety and soundness of platforms and other service providers that hold crypto assets for users.
As crypto assets have grown in both popularity and market size, various U.S. federal, state, and local and foreign governmental organizations, consumer agencies and public advocacy groups have been examining the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities, fund criminal or terrorist enterprises, and simultaneously how to ensure the safety and soundness of platforms and other service providers that hold crypto assets for users.
These new rules may give rise to potential liabilities or disclosure requirements for prior customer arrangements and new rules that affect how we onboard our customers 62 and report their transactions to taxing authorities.
These new rules may give rise to potential liabilities or disclosure requirements for prior customer arrangements and new rules that affect how we onboard our customers and report their transactions to taxing authorities.
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.
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.
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.
Our existing competitors have, and our potential competitors are expected to have, 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; 33 Table of Contents • 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.
Further, any material failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, which could adversely impact our business, operating results, and financial condition.
Further, any material failure by us or our partners to maintain the necessary controls or to manage customer crypto assets and funds appropriately and in compliance with applicable regulatory requirements could result in reputational harm, litigation, regulatory enforcement actions, significant financial losses, lead customers to discontinue or reduce their use of our and our partners’ products, and result in significant penalties and fines and additional restrictions, 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 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 blockchain 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.
The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources.
The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of expenses that are not readily apparent from other sources.
Additionally, many foreign countries and governmental bodies, including Australia, Brazil, Kenya, the European Union, India, Japan, Philippines, Indonesia, Singapore, United Kingdom, Switzerland, and numerous other jurisdictions in which we operate or conduct our business, have laws and regulations concerning the collection, use, processing, storage, and deletion of personal information obtained from their residents or by businesses operating within their jurisdiction.
Additionally, many foreign countries and governmental bodies, including Australia, Brazil, Kenya, the European Union, India, Japan, Philippines, Indonesia, Singapore, United Kingdom, Switzerland, and numerous other jurisdictions in which we operate or conduct our business, have laws and regulations concerning the collection, use, processing, storage, and deletion of personal data obtained from their residents or by businesses operating within their jurisdiction.
Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets, products or services as “securities.” The classification of a crypto asset, product or service as a security under applicable law has wide- 38 ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing, as applicable, of such assets, products or services.
Various foreign jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets, products or services as “securities.” The classification of a crypto asset, product or service as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading, and clearing, as 38 Table of Contents applicable, of such assets, products or services.
Unfavorable publicity regarding, for example, our product changes, product quality, litigation or regulatory activity, privacy practices, terms of service, employment matters, the use of our products, services, or supported crypto assets for illicit or objectionable ends, the actions of our customers, or the actions of other companies that provide similar services to ours, has in the past, and could in the future, adversely affect our reputation.
Unfavorable publicity regarding, for example, our product changes, product quality, litigation or regulatory activity, privacy and data security practices, terms of service, employment matters, the use of our products, services, or supported crypto assets for illicit or objectionable ends, the actions of our customers, or the actions of other companies that provide similar services to ours, has in the past, and could in the future, adversely affect our reputation.
Our key business metrics may also be impacted by compliance or fraud-related bans, technical 54 incidents, or false or spam accounts in existence on our platform.
Our key business metrics may also be impacted by compliance or fraud-related bans, technical incidents, or false or spam accounts in existence on our platform.
We may not be able to generate sufficient cash to service our debt and other obligations, including our obligations under the 2026 Convertible Notes and Senior Notes.
We may not be able to generate sufficient cash to service our debt and other obligations, including our obligations under the 2026 Convertible Notes, 2030 Convertible Notes, and Senior Notes.
Such rules are under discussion today by the member and observer states of the “Organization for Economic Cooperation and Development” and by the European Commission on behalf of the member states of the European Union.
Such rules are under discussion by the member and observer states of the “Organization for Economic Cooperation and Development” and by the European Commission on behalf of the member states of the European Union.
Cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results, and financial condition. Our business involves the collection, storage, processing, and transmission of confidential information, customer, employee, service provider, and other personal data, as well as information required to access customer assets.
Cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely affect our brand, reputation, business, operating results, and financial condition. Our business involves the collection, storage, processing, and transmission of confidential information, customer, employee, service provider, and other personal data, as well as information required to access customer assets.
If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely impact our business, operating results, and financial condition. Our industry has been characterized by many rapid, significant, and disruptive products and services in recent years.
If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely affect our business, operating results, and financial condition. Our industry has been characterized by many rapid, significant, and disruptive products and services in recent years.
We are, and may continue to be, subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, and operating results.
We are, and may continue to be, subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could adversely affect our business, operating results, and financial condition.
However, these DeFi protocols are subject to various risks, including uncertain regulatory and compliance conditions in large markets such as the United States, the risk that the underlying smart contract is insecure, the risk that borrowers may default and the investor will not be able to recover its investment, the risk that any underlying collateral may experience significant volatility, and the risk of certain core developers with protocol administration rights can make unauthorized or harmful changes to the underlying smart contract.
However, these DeFi protocols are subject to various risks, including uncertain regulatory and compliance conditions in large markets such as the United States, the risk that the underlying smart contract is insecure, the risk that borrowers may default and the investor will not be able to recover its investment, the risk that any underlying collateral may experience significant volatility, and the risk of certain core developers with protocol administration rights can make unauthorized 57 Table of Contents or harmful changes to the underlying smart contract.
Loss of a critical banking or insurance relationship could adversely impact our business, operating results, and financial condition. We rely on bank relationships to provide our platform and custodial services. In particular, customer cash holdings on our platform are held with one or more of our multiple banking partners.
Loss of a critical banking or insurance relationship could adversely affect our business, operating results, and financial condition. We rely on bank relationships to provide our platform and custodial services. In particular, customer cash holdings on our platform are held with one or more of our multiple banking partners.
We also rely on insurance carriers to insure customer losses resulting from a breach of our physical security, cyber security, or by employee or third party theft and hold surety bonds as required for compliance with certain of our licenses under applicable state laws.
We also rely on insurance carriers to insure customer losses resulting from a breach of our physical security, cybersecurity, or by employee or third party theft and hold surety bonds as required for compliance with certain of our licenses under applicable state laws.
In each instance, we require bank-level security encryption to safeguard customers’ assets for our wallet and storage systems, as well as our financial management systems related to such custodial functions. Our security technology is designed to prevent, detect, and mitigate inappropriate access to our systems, by internal or external threats.
In each instance, we require bank-level security encryption to store customers’ assets for our wallet and storage systems, as well as our financial management systems related to such custodial functions. Our security technology is designed to prevent, detect, and mitigate inappropriate access to our systems, by internal or external threats.
District Court for the Southern District of New York against us and Coinbase, Inc. alleging that (i) Coinbase, Inc. has acted as an unregistered securities exchange, broker, and clearing agency in violation of Sections 5, 15(a) and 17A(b) of the Exchange Act and that, through its staking program, Coinbase, Inc. has offered and sold securities without registering its offers and sales in 32 violation of Sections 5(a) and 5(c) of the Securities Act of 1933, as amended (the “Securities Act”), and (ii) we are liable for the alleged violations as an alleged control person of Coinbase, Inc.
District Court for the Southern District of New York (the “District Court”) against us and Coinbase, Inc. alleging that (i) Coinbase, Inc. has acted as an unregistered securities exchange, broker, and clearing agency in violation of Sections 5, 15(a) and 17A(b) of the Exchange Act and that, through its staking program, Coinbase, Inc. has offered and sold securities without registering its offers and sales in violation of Sections 5(a) and 5(c) of the Securities Act of 1933, as amended (the “Securities Act”), and (ii) we are liable for the alleged violations as an alleged control person of Coinbase, Inc.
Additionally, under recommendations from the Financial Crimes Enforcement Network (“FinCEN”), and the Financial Action Task Force (“FATF”), the United States and 30 several foreign jurisdictions have or are likely to impose the Funds Travel Rule and the Funds Transfer Rule (commonly referred to collectively as the Travel Rule) on financial service providers in the cryptoeconomy.
Additionally, under recommendations from the Financial Crimes Enforcement Network (“FinCEN”), and the Financial Action Task Force, the United States and several foreign jurisdictions have or are likely to impose the Funds Travel Rule and the Funds Transfer Rule (commonly referred to collectively as the Travel Rule) on financial service providers in the cryptoeconomy.
This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely impact our business, operating results, and financial condition.
This may result in customers finding our custodial services more risky and less attractive and any failure to increase our customer base, discontinuation or reduction in use of our platform and products by existing customers as a result could adversely affect our business, operating results, and financial condition.
If any of these risks materialize, our investments in these DeFi protocols may be adversely impacted. We may suffer losses due to abrupt and erratic market movements. The crypto asset market has been characterized by significant volatility and unexpected price movements, and experienced significant declines in 2022.
If any of these risks materialize, our investments in these DeFi protocols may be adversely impacted. We may suffer losses due to abrupt and erratic market movements. The crypto asset market has been characterized by significant volatility and unexpected price movements, and has experienced significant declines in the past.
We do not intend to monetize our patents or attempt to block third parties from competing with us by asserting our patents offensively, but our ability to successfully defend intellectual property challenges from competitors and other parties may depend, in part, on our ability to counter-assert our patents defensively.
We do not intend to monetize our patents or attempt to block third parties from competing with us by asserting our patents offensively, but our ability to successfully defend intellectual property challenges from competitors and other parties may depend, in part and where permissible, on our ability to counter-assert our patents defensively.
A determination by the SEC, a state or foreign regulatory authority, or a court that an asset that we currently support for trading on our platform, or product or service that we offer on our platform, constitutes a security may result in us removing that crypto asset from or ceasing to offer that product or service on our platform, and may also result in us determining that it is advisable to remove assets from our platform, or to cease offering products and services on our platform, that have similar characteristics to the asset, product or service 39 that was alleged or determined to be a security.
A determination by the SEC, a state or foreign regulatory authority, or a court that an asset that we currently support for trading on our platform, or product or service that we offer on our platform, constitutes a security may result in us removing that crypto asset from or ceasing to offer that product or service on our platform, and may also result in us determining that it is advisable to remove assets from our platform, or to cease offering products and services on our platform, that have similar characteristics to the asset, product or service 39 Table of Contents that was alleged or determined to be a security.
Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction. For our consumer trading product, we also charge a spread to ensure that we are able to settle purchases and sales at the price we quote to customers.
Transaction revenue is based on transaction fees that are either a flat fee or a percentage of the value of each transaction. For our consumer trading product, we also charge a spread to ensure that we are able to settle purchases and sales at the prices we quote to customers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program includes: • physical, technological, and administrative controls intended to support our cybersecurity and data governance framework, including protections designed to protect the confidentiality, integrity, and availability of our key information systems and customer, employee, partner, and other third-party information stored on those systems, such as access controls, encryption, data handling requirements, and other cybersecurity safeguards, and internal policies that govern our cybersecurity risk management and data protection practices; • a defined procedure for timely incident detection, containment, response, and remediation, including a written security incident response plan that includes procedures for responding to cybersecurity incidents; • cybersecurity risk assessment processes designed to help identify material cybersecurity risks to our critical systems, information, products, services, and broader enterprise IT environment; • a security team responsible for managing our cybersecurity risk assessment processes and security controls; • the use of external consultants or other third-party experts and service providers, where considered appropriate, to assess, test, or otherwise assist with aspects of our cybersecurity controls; • annual cybersecurity and privacy training of employees, including incident response personnel and senior management, and specialized training for certain teams depending on their role and/or access to certain types of information, such as consumer information; and 85 • a third-party risk management process that includes internal vetting of certain third-party vendors and service providers with whom we may share data.
Biggest changeOur cybersecurity risk management program includes: • physical, technological, and administrative controls intended to support our cybersecurity and data governance framework, including protections designed to protect the confidentiality, integrity, and availability of our key information systems and customer, employee, partner, and other third-party information stored on those systems, such as access controls, encryption, data handling requirements, and other cybersecurity safeguards, and internal policies that govern our cybersecurity risk management and data protection practices; • a defined procedure for timely incident detection, containment, response, and remediation, including a written security incident response plan that includes procedures for responding to cybersecurity incidents; • cybersecurity risk assessment processes designed to help identify material cybersecurity risks to our critical systems, information, products, services, and broader enterprise IT environment; • a security team responsible for managing our cybersecurity risk assessment processes and security controls; • the use of external consultants or other third-party experts and service providers, where considered appropriate, to assess, test, or otherwise assist with aspects of our cybersecurity controls; • annual cybersecurity and privacy training of employees, including incident response personnel and senior management, and specialized training for certain teams depending on their role and/or access to certain types of information, such as consumer information; and • a third-party risk management process that includes internal vetting of certain third-party vendors and service providers with whom we may share data. 85 Table of Contents Over the past fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents we have experienced from time to time, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, operating results, or financial condition.
Our CSO’s and CISO’s experience includes years of working in the cybersecurity field in various industries, including the financial services industry. 86 Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including through periodic ERMWG sub-working group meetings; briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Our CSO’s and CISO’s experience includes years of working in the cybersecurity field in various industries, including the financial services industry. 86 Table of Contents Our management team supervises efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, including through periodic ERMWG sub-working group meetings; briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources, including external consultants engaged by us; and alerts and reports produced by security tools deployed in the IT environment.
Removed
Over the past fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents we have experienced from time to time, that have materially affected or are reasonably likely to materially affect us, including our operations, business strategy, operating results, or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe currently lease facilities in various locations in the United States and other countries around the world. We believe that our facilities are adequate to meet our needs for the immediate future, and that, should we need additional physical office space, suitable additional space will be available in the future.
Biggest changeWe believe that our facilities are adequate to meet our needs for the immediate future, and that, should we need additional physical office space, suitable additional space will be available in the future.
We 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.
We hold all of our stockholder meetings virtually. As a result of this strategy, we do not maintain a headquarter s , but do currently lease physical offices in select major cities in the United States and other countries around the world for purposes of collaboration and team building.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn 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.
Biggest changeIn addition, we have received investigative subpoenas from the SEC and similar subpoenas and demand letters from various regulators for documents and information, including about certain customer programs, operations, and existing and intended future products, including our processes for listing assets, the classification of certain listed assets, our staking programs, and our stablecoin and yield-generating products.
Item 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.
ITEM 3. LEGAL PROCEEDINGS For a description of material legal proceedings in which we are involved, see Note 21. 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.
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Mine Safety Disclosures Not applicable. 87 PART II
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We intend to cooperate fully with such investigations. These examples are not exhaustive. ITEM 4. MINE SAFETY DISCLOSURES Not applicable PART II. OTHER INFORMATION

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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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.
Biggest changeBenchmark Financial Services Index, the S&P North American Technology Index, and the price of Bitcoin. The 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 in each index and assumes the reinvestment of dividends, if any.
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.
We are not obligated to pay any dividends on our 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.
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.
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, 2024 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 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.
Our Class B common stock is not listed or traded on any stock exchange. 87 Table of Contents Holders of Record As of February 6, 2025, there were 263 registered holders of record of our Class A common stock and 8 registered holders of record of our Class B common stock.
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.
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. 88 Table of Contents Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities We did not repurchase any shares of our Class A common stock during the three months ended December 31, 2024.
Removed
Benchmark Financial Services Index, the S&P North American Technology Index, and the price of Bitcoin.
Added
The historical data shown below should not be considered an indication of potential future stock price performance. Historical Bitcoin prices are primarily based on data obtained from our platform.
Removed
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.
Removed
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 changeSome of these limitations are Adjusted EBITDA excludes: • benefit from income taxes; • interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; • depreciation and intangible assets amortization expense and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future; • stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • other impairment expense, which represents impairment on property and equipment and intangible assets and is infrequent in nature and is a non-cash adjustment; 105 Table of Contents • non-recurring accrued legal contingencies, settlements, and related costs, which reduces cash available to us; • non-recurring expenses related to our Direct Listing in April 2021; • impairment on crypto assets still held, net, represents impairment on crypto assets still held and is a non-cash expense, which has been recurring, and may in the future recur, although the crypto assets impaired may be sold in the future at a price at or higher than the price the assets have been impaired to; • the impact of restructuring, which is infrequent and not related to normal operations but impacted our results in 2022 and 2023; • the impact of fair value gain or loss on derivatives, a non-cash expense, which has been recurring, and may in the future recur; • the impact of crypto asset borrowing costs, a non-cash expense, which is similar in nature to interest expense on our crypto asset borrowings, which has been recurring, and may in the future recur; • gain on extinguishment of long-term debt due to repurchases prior to maturity, a non-cash adjustment, which has been recurring, and may in the future recur; • gain or loss on investments, which represents net gains on investments and impairment on investments, net, a non-cash expense, which has been recurring, and may in the future recur, although the impaired investments may be sold in the future at a price lower, at or higher than the price the assets have been impaired to; • the impact of unrealized foreign exchange gains or losses and fair value adjustments on foreign exchange derivatives for hedging activities, non-cash adjustments, which have been recurring, and may in the future recur; and • a non-recurring fee and write-off related to an early lease termination, a non-recurring accrual for value-added tax related to our Irish operations, and non-cash unrealized gains or losses on contingent consideration, which we have consolidated into the line item “other adjustments, net” because they are not material individually.
Biggest changeSome of these limitations are that Adjusted EBITDA excludes: • provision for (benefit from) income taxes; • interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; • depreciation and amortization expense and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future; • stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy; • net gains or losses on our crypto assets held for investment, net, after the adoption of ASU 2023-08; • other (income) expense, net, which represents foreign exchange gains or losses, gains or losses on strategic investments, net, gains on the repurchase of certain of our long-term debt, and other non-operating income and expense activity; • non-recurring lease charges, which represent a non-recurring fee and write-off related to an early lease termination; • non-recurring accrued legal contingencies, settlements, and related costs, which reduces cash available to us; • impairment on crypto assets still held, net, which represents impairment on crypto assets still held and is a non-cash expense, prior to the adoption of ASU 2023-08; and • the impact of restructuring, which is not related to normal operations but impacted our results in 2023. 100 Table of Contents 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.
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.
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 our 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.
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.
Summary of Significant Accounting Policies — Recent accounting pronouncements 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.
We determined that valuation of privately-held strategic investments represents a critical accounting estimate because impairment evaluations and pricing adjustments involve significant judgment, estimates, and assumptions, and to the extent that these estimates and assumptions change materially or if actual circumstances differ from those in the assumptions, our financial statements could be materially impacted.
We determined that valuation of privately-held strategic investments represents a critical accounting estimate because impairment evaluations involve significant judgment, estimates, and assumptions, and to the extent that these estimates and assumptions change materially or if actual circumstances differ from those in the assumptions, our financial statements could be materially impacted.
As market conditions warrant, we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions, by exchange transaction or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity and other factors and may be commenced or suspended at any time.
As market conditions warrant, we may, from time to time, repurchase our outstanding long-term debt securities in the open market, in privately negotiated transactions, by exchange transaction, or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity, and other factors, and may be commenced or suspended at any time.
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.
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 the provision for income taxes. See Note 17.
Th e following discussion and analysis contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.
Th e following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements.
Based on future market conditions, these changes could be material to our financial statements. For more information regarding these market conditions and related sensitivity, see the section titled “ Item 7A. Quantitative and Qualitative Disclosures about Market Risk – Equity investment risk . See Note 11.
Based on future market conditions, these changes could be material to our financial statements. For more information regarding these market conditions and related sensitivity, see the section titled “ Item 7A. Quantitative and Qualitative Disclosures about Market Risk – Equity investment risk . See Note 13.
Assessing the need for a valuation allowance requires a great deal of judgement and we consider all available evidence, both positive and negative, to determine whether it is more likely than not that our deferred tax assets are recoverable.
Assessing the need for a valuation allowance requires a great deal of judgment and we consider all available evidence, both positive and negative, to determine whether it is more likely than not that our deferred tax assets are recoverable.
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.
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, 2024, 2023, and 2022.
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.
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, 2024, we were in compliance with these capital requirements.
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 unrecognized tax benefits for the years ended December 31, 2023, 2022, and 2021. For U.S. federal tax purposes, crypto asset transactions are treated on the same tax principles as property transactions.
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 unrecognized tax benefits for the years ended December 31, 2024, 2023, and 2022. For U.S. federal tax purposes, crypto asset transactions are treated under the same tax principles as property transactions.
If indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using an Option-Pricing Model that uses publicly available market data of comparable companies and other unobservable inputs including expected volatility, expected time to liquidity, adjustments for other company-specific developments, and the rights and obligations of the securities we hold.
If indicators of impairment exist, we prepare quantitative measurements of the fair value of our equity investments using an Option-Pricing Model that uses publicly available market data of comparable companies and other unobservable inputs including expected volatility, expected time to 108 Table of Contents liquidity, adjustments for other company-specific developments, and the rights and obligations of the securities we hold.
These estimates are highly sensitive to change and involve variables that are not completely within our control nor practicable to model, including decisions made by regulators and settlement negotiations. Resolution of legal and 116 Table of Contents other contingencies in a manner inconsistent with management’s expectations could have a material impact on our financial condition and results of operations.
These estimates are highly sensitive to change and involve variables that are not completely within our control nor practicable to model, including decisions made by regulators and settlement negotiations. Resolution of legal and other contingencies in a manner inconsistent with management’s expectations could have a material impact on our financial condition and results of operations.
When the quantitative remeasurements of fair value indicate an impairment exists, we write down the investment to its current fair value. 115 Table of Contents 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.
When the quantitative remeasurements of fair value indicate an impairment exists, we write down the investment to its current fair value. 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.
We evaluate all available evidence including, but not limited to, history of earnings and losses, forecasts of future taxable income, and the weight of evidence that can be objectively verified. See Note 20.
We evaluate all available evidence including, but not limited to, history of earnings and losses, forecasts of future taxable income, and the weight of evidence that can be objectively verified. See Note 17.
For example, if interest income and stablecoin revenue increase as a percentage of net revenue, transaction expenses as a percentage of net revenue will decrease as there are no transaction expenses directly attributed to these revenues.
For example, if interest income and stablecoin revenue increase as a percentage of total revenue, transaction expenses as a percentage of total revenue will decrease as there are no transaction expenses directly attributed to these revenues.
See the section titled “ —Results of operations—Comparison of the years ended December 31, 2023, 2022, and 2021—Operating expenses—General and administrative expenses ” above for discussion of material changes in legal and other contingencies during the years ended December 31, 2023, 2022, and 2021. Recent Accounting Pronouncements See Note 2.
See the section titled “ —Results of operations—Comparison of the years ended December 31, 2024 and 2023—Operating expenses—General and administrative ” above for discussion of material changes in legal and other contingencies during the years ended December 31, 2024 and 2023. Recent accounting pronouncements See Note 2.
We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. In addition, we record recoveries of these losses when it is probable that they will be collected.
We record a liability when it is probable that a loss has been incurred and the amount is reasonably estimable, the determination of which requires significant judgment. In addition, 109 Table of Contents we record recoveries of these losses when it is probable that they will be collected.
As of December 31, 2023, we have not experienced excessive redemptions or withdrawals, or prolonged suspended redemptions or withdrawals, of crypto assets to date.
As of December 31, 2024, we have not experienced excessive redemptions or withdrawals, or prolonged suspended redemptions or withdrawals, of crypto assets to date.
Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “Coinbase” refer to Coinbase Global, Inc. and its consolidated subsidiaries.
Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “Coinbase” refer to Coinbase Global, Inc. and its c onsolidated subsidiaries.
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.
Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial funds, and in-transit customer receivables. As of December 31, 2024 and 2023, our eligible liquid assets were greater than the aggregate amount of customer custodial fund liabilities.
The amounts involved and total consideration paid may be material. In 2023, we repurchased $427.0 million in aggregate principal amount of our outstanding debt securities for cash payments aggregating $303.5 million .
The amounts involved and total consideration paid may be material. In 2023, we repurchased $427.0 million in aggregate principal amount of our outstanding long-term debt securities for cash payments aggregating $303.5 million . See Note 10.
There were no material changes to note within personnel-related expenses and other.
There were no material changes to note within personnel-related or other.
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.
Limitations of Adjusted EBITDA We believe that Adjusted EBITDA may be helpful to investors for the reasons noted above. 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.
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.
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, 2024, our net income was $2.6 billion and Adjusted EBITDA was $3.3 billion.
Institutional customers incur lower fees per transaction than consumer customers and, as a result, the impact of changes in consumer Trading Volume on transaction revenue is more pronounced than changes in institutional Trading Volume. In addition, changes in our pricing and mix between types of transactions will affect transaction revenue.
Institutional customers incur lower fees per transaction than consumer customers and, as a result, the impact of changes in consumer Trading Volume on transaction revenue is more pronounced than the impact of changes in institutional Trading Volume.
Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise. Intangible assets assessed as having indefinite lives are not amortized, but are assessed for indicators that the useful life is no longer indefinite or for indicators of impairment each period.
Intangible assets assessed as having indefinite lives are not amortized, but are assessed for indicators that the useful life is no longer indefinite or for indicators of impairment each period.
Our primary uses of cash from operating activities include payments to employees for compensation, payments for website hosting and infrastructure services, professional services, outsourced customer support costs, and other general corporate expenditures.
Our primary uses of cash from operating activities include payments to employees for compensation, website hosting and infrastructure services, and professional services.
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.
Fair Value Measurements 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 strategic investments for the years ended December 31, 2024 and 2023.
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.
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.
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 .
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 assets borrowed or the value of crypto assets pledged as collateral . If crypto asset prices rise, we will post additional collateral to maintain required collateral loan ratio s.
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.
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 subsequently measured at acquisition date fair value, less accumulated amortization.
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.
As a result, our crypto assets held for operations are considered less liquid than our cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. See Note 5.
(4) USDC is a stablecoin redeemable on a one-to-one basis for U.S. dollars. While not accounted for as cash or cash equivalents, we treat our USDC holdings as a liquidity resource.
(2) USDC is a stablecoin redeemable on a one-to-one basis for U.S. dollars. While not accounted for as cash or cash equivalents, we treat our USDC holdings as a liquidity resource. (3) USDC loaned represents loaned assets that do not meet the criteria for derecognition in our Consolidated Balance Sheets.
We anticipate satisfying our short-term cash requirements with our existing cash and cash equivalents and USDC and may satisfy our long-term cash requirements with cash and cash equivalents and USDC on hand or with proceeds from a future equity or debt financing.
We anticipate satisfying our short-term cash requirements with our existing cash and cash equivalents and USDC and with future cash flows from operations and may satisfy our long-term cash requirements additionally with proceeds from a future equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders.
In the future, if there are material changes in the underlying 114 Table of Contents estimates and assumptions pertaining to the impairment assessment, our financial statements could be materially impacted.
There were no changes to the qualitative factors considered indicating an impairment of goodwill for the reporting periods presented. In the future, if there are material changes in the underlying estimates and assumptions pertaining to the impairment assessment, our financial statements could be materially impacted.
We review factors including changes in our stock price, macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in any key personnel, and any changes in the composition of the carrying amount of our assets. There were no changes to the qualitative factors considered indicating an impairment of goodwill for the reporting periods presented.
We review factors including changes in our 107 Table of Contents stock price, macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, changes in any key personnel, and any changes in the composition of the carrying amount of our assets.
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.
MTUs also engage in transactions that are non-revenue generating, such as consumers sending and receiving crypto assets between wallets and off-platform accounts on a non-expedited basis. MTUs may overstate the number of unique consumers due to differences in product architecture or user behavior.
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.
See Note 3. Revenue of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional details.
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.
During times of instability in the crypto assets market, we may not be able to sell our crypto assets at reasonable prices or at all.
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.
We do not use customer crypto assets as collateral for any loan, margin, rehypothecation, or other similar activities to which we or our affiliates are a party, without the customer’s consent. 104 Table of Contents Our business model does not expose us to liquidity risk if we have excessive redemptions or withdrawals from customers.
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.
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 affect our business, operating results, and financial condition included in Part I, Item 1A of this Annual Report on Form 10-K for further information.
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.
S ee the section titled “ Non-GAAP Financial Measure ” below for a reconciliation of net income to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors. 90 Table of Contents 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.
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.
Additionally, the growth in USDC balances is primarily attributable to the USDC rewards program, combined with deeper integration of USDC across our products. 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.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2023 as compared to the year ended December 31, 2022 can be found in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on February 15, 2024, which is incorporated by reference herein. 89 Table of Contents 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.
Transaction revenue declined for the year ended December 31, 2022 as compared to 2021, primarily due to: • a $4.5 billion reduction in consumer transaction revenue attributed to a corresponding 69% decrease in consumer Trading Volume.
Transaction revenue increased for the year ended December 31, 2024 as compared to 2023, due to: • an increase in consumer transaction revenue of $2.6 billion due to a 195% increase in consumer Trading Volume.
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.
Long-term debt On March 18, 2024, we issued $1.3 billion in aggregate principal amount of convertible senior notes that mature on April 1, 2030, unless converted, redeemed or repurchased on an earlier date. As of December 31, 2024, we held $4.3 billion in aggregate principal amount of long-term debt.
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.
Crypto assets held for investment We view our crypto asset investments as primarily long-term holdings and we do not and do not plan to engage in regular trading of these crypto assets.
Restructuring expense Restructuring expense was $142.6 million for the year ended December 31, 2023 and was driven by separation pay, stock-based compensation expense relating to the acceleration of the vesting of outstanding equity awards in accordance with the terms of such awards, and other personnel costs related to the workforce reduction in January 2023.
Beginning January 2024, we adopted ASU 2023-08, and as a result no longer record crypto asset impairments. Restructuring Restructuring expense was $142.6 million for the year ended December 31, 2023, comprising separation pay, stock-based compensation expense, and other personnel costs related to the workforce reduction in January 2023. There were no restructuring expenses for the year ended December 31, 2024.
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.
Summary of Significant Accounting Policies—Change in accounting principle , of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.
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.
Year Ended December 31, Change 2024 2023 % Trading Volume (in billions) Consumer $ 221 $ 75 195 Institutional 941 393 139 Total Trading Volume $ 1,162 $ 468 148 Trading Volume by crypto asset Bitcoin 32 % 34 % (6) Ethereum 12 20 (40) USDT (1) 13 11 18 Other crypto assets (2) 43 35 23 Total 100% 100% ____________________________________ (1) USDT is a stablecoin issued by Tether Operations Limited.
Benefit from income taxes Year Ended December 31, Change 2023 2022 2023 2022 2021 $ % $ % (in thousands) (in thousands) (in thousands) Benefit from income taxes $ (171,716) $ (439,633) $ (597,173) $ 267,917 (61) $ 157,540 (26) The benefit from income taxes decreased for the year ended December 31, 2023 as compared to 2022 primarily due to lower tax benefits from a reduction of pretax loss, partially offset by a reduction in the valuation allowance recorded on impairment charges and additional tax benefits for stock-based compensation.
Provision for (benefit from) income taxes Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Provision for (benefit from) income taxes $ 363,578 $ (171,716) $ 535,294 (312) For the year ended December 31, 2024 as compared to 2023, the increase in provision for income taxes was primarily due to higher pretax income, partially offset by tax benefits from stock-based compensation.
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.
Generally, Trading Volume on our platform is primarily influenced by overall market dynamics, namely the price of crypto assets, crypto asset volatility, and macroeconomic conditions, and by our share of total crypto market spot trading volume. In periods of high crypto asset prices and crypto asset volatility, we have experienced correspondingly high levels of Trading Volume on our platform.
Other (income) expense, net Year Ended December 31, Change 2023 2022 2023 2022 2021 $ % $ % (in thousands) (in thousands) (in thousands) Foreign exchange losses, net $ 10,609 $ 161,749 $ 40,989 $ (151,140) (93) $ 120,760 295 (Gains) losses on strategic investments (24,368) 101,219 (19,602) (125,587) (124) 120,821 (616) Gain on extinguishment of long-term debt (117,383) — — (117,383) 100 — — Other (36,441) 2,505 (924) (38,946) nm 3,429 (371) Total other (income) expense, net $ (167,583) $ 265,473 $ 20,463 $ (433,056) (163) $ 245,010 nm __________________ nm - not meaningful Other (income) expense, net changed for the year ended December 31, 2023, as compared to 2022, primarily due to: • a decrease in net foreign exchange losses due to improvement in foreign exchange risk management; • net gains on strategic investments driven by a gain of $49.9 million resulting from an equity investment transaction with Circle US Holdings, Inc. in 2023 and a decrease in the amount of impairment expense recognized on certain strategic equity investments; • a gain on the repurchase of certain of our 2026 Convertible Notes and Senior Notes during 2023.
Gains on crypto assets held for investment, net Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Gains on crypto assets held for investment, net $ (687,055) $ — $ (687,055) nm __________________ nm - not meaningful Gains on crypto assets held for investment, net during the year ended December 31, 2024 were primarily due to remeasurement of the fair value of crypto assets held, mainly reflecting increases in the prices of Bitcoin and Ethereum. 98 Table of Contents Other income, net Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Losses (gains) on strategic investments, net $ 11,553 $ (24,368) $ 35,921 (147) Gain on extinguishment of long-term debt, net — (117,383) 117,383 nm Other (40,627) (25,832) (14,795) 57 Total other income, net $ (29,074) $ (167,583) $ 138,509 (83) __________________ nm - not meaningful Other income, net changed for the year ended December 31, 2024 as compared to 2023, due to: • a decrease in gains on strategic investments, net driven by a gain of $49.9 million resulting from an equity investment transaction with Circle US Holding, Inc. during the third quarter of 2023; and • a net gain on the repurchase of certain of our 2026 Convertible Notes and certain of our Senior Notes during 2023.
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.
MTUs increased for the year ended December 31, 2024 as compared to 2023, primarily due to a 1.3 million increase in trading users, influenced by overall crypto market sentiment and activity and higher average crypto asset prices.
Interest expense Year Ended December 31, Change 2023 2022 2023 2022 2021 $ % $ % (in thousands) (in thousands) (in thousands) Interest expense $ 82,766 $ 88,901 $ 29,160 $ (6,135) (7) $ 59,741 205 There were no material changes in interest expense for the year ended December 31, 2023 as compared to 2022.
Interest expense Year Ended December 31, Change (in thousands, except %) 2024 2023 $ % Interest expense $ 80,645 $ 82,766 $ (2,121) (3) There were no material changes to note within Interest expense.
During the year ended December 31, 2023, no asset other than Bitcoin, Ethereum, and USDT individually represented more than 10% of our Trading Volume and no asset other than Bitcoin and Ethereum individually represented more than 10% of our transaction revenue.
The percentage of transaction revenue from trading on our platform broken down by crypto asset was as follows: Year Ended December 31, Change 2024 2023 % Bitcoin 30 % 35 % (14) Ethereum 13 17 (24) Other crypto assets (1) 57 48 19 Total 100 % 100 % ____________________________________ (1) No other crypto asset individually represented more than 10% of the total.
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.
As of December 31, 2024 , 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) $ 9,885 $ 132,327 Non-cancelable purchase obligations (2) 119,874 198,486 Long-term debt (3) Interest 70,010 349,089 Principal — 4,275,470 Total $ 199,769 $ 4,955,372 _______________ (1) Primarily relating to lease payments due for corporate offices.
Benefit 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.
These daily volatility values are then averaged over the applicable time period as needed. 92 Table of Contents Results of Operations The following table presents the Consolidated Statements of Operations (in thousands), as well as each component as a percentage of total revenue: Year Ended December 31, 2024 2023 $ % (1) $ % (1) Revenue: Net revenue $ 6,293,246 96 $ 2,926,540 94 Other revenue 270,782 4 181,843 6 Total revenue 6,564,028 100 3,108,383 100 Operating expenses: Transaction expense 897,707 14 420,705 14 Technology and development 1,468,252 22 1,324,541 43 Sales and marketing 654,444 10 332,312 11 General and administrative 1,300,257 20 1,074,308 35 Gains on crypto assets held for operations, net (71,725) (1) — — Crypto asset impairment, net — — (34,675) (1) Restructuring — — 142,594 5 Other operating expense, net 7,933 — 10,260 — Total operating expenses 4,256,868 65 3,270,045 105 Operating income (loss) 2,307,160 35 (161,662) (5) Interest expense 80,645 1 82,766 3 Gains on crypto assets held for investment, net (687,055) (10) — — Other income, net (29,074) — (167,583) (5) Income (loss) before income taxes 2,942,644 45 (76,845) (2) Provision for (benefit from) income taxes 363,578 6 (171,716) (6) Net income $ 2,579,066 39 $ 94,871 3 __________________ (1) Figures presented above may not sum precisely due to rounding.
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.
Cash flows The following table summarizes our Consolidated Statements of Cash Flows (in thousands): Year Ended December 31, 2024 2023 Net cash provided by operating activities $ 2,556,844 $ 922,951 Net cash (used in) provided by investing activities (282,385) 5,392 Net cash provided by (used in) financing activities 2,828,921 (811,332) Net increase in cash, cash equivalents, and restricted cash and cash equivalents $ 5,103,380 $ 117,011 Change in customer custodial cash and cash equivalents $ 1,634,934 $ (585,666) Operating activities Our largest source of cash provided by operations are revenues generated from transaction fees.
Conversely, if blockchain rewards increase as a percentage of net revenue, transaction expenses as a percentage of net revenue will increase since the majority of blockchain rewards revenue is distributed to the customer. Additionally, transaction expenses can be impacted by the commission or fee we charge for staking our customers’ assets, as well as by transaction reversal losses.
Conversely, if blockchain rewards increase as a percentage of total revenue, transaction expenses as a percentage of total revenue will increase since the majority of blockchain rewards revenue is distributed to the customer. There was no change in overall transaction expense as a percentage of total revenue when comparing the periods presented.
Management also concluded that the Company’s reporting unit was not at risk of failing this test as of December 31, 2023. Intangible assets Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset.
Intangible assets Intangible assets are initially valued at fair value using generally accepted valuation methods appropriate for the type of intangible asset. Intangible assets with definite lives are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.
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.
General and administrative expenses increased for the year ended December 31, 2024 as compared to 2023, due to: • an increase in personnel-related expenses largely driven by increased stock-based compensation expense as a result of the 2023 annual employee equity awards being granted at a lower stock price as compared to the 2024 annual employee equity rewards; • higher professional services expenses driven by an increase of $30.0 million in legal advisory services, offset in part by lower business consulting expenses; • an increase in customer support costs as a result of increased capacity needs.
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.
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, 2024 2023 % MTUs (1) (in millions) 8.4 7.4 14 Assets on Platform (2) (in billions) $ 404 $ 191 112 Trading Volume (in billions) $ 1,162 $ 468 148 Net income (in millions) $ 2,579 $ 95 nm Adjusted EBITDA (3) (in millions) $ 3,348 $ 978 242 _____________ nm - not meaningful (1) Represents the annual average MTUs, calculated as the average of quarterly MTUs, which are derived from the average of each month’s MTUs in each respective quarter.
This decrease was offset in part by an increase of $222.9 million attributed to changes in customer mix towards trades which have higher fees and pricing changes as we increased the spread on certain types of consumer trades in 2022, which led to an overall increase in average blended fee rate of 11%; and • a decrease of $144.0 million in institutional transaction revenue attributed to a decline in institutional Trading Volume of 42%, as well as a decrease of $82.9 million driven by lower fees associated with our market maker program, which led to an overall decrease in average blended fee rate of 41%.
This increase was offset in part by a decrease of $482.5 million attributed to a lower average blended fee rate, primarily due to changes in the mix of Trading Volume from Simple to Advanced trading; • an increase in institutional transaction revenue of $139.1 million primarily due to a 139% increase in institutional Trading Volume, as well as growth in revenue from derivatives trading on our international exchange, which was launched in the second quarter of 2023; and • an increase in other transaction revenue of $77.8 million from transactions on Base, which was launched in the third quarter of 2023, as well as higher revenue from instant transfer withdrawals.
Net cash used in operating activities increased by $5.6 billion for the year ended December 31, 2022 as compared to 2021 primarily due to: • a $4.6 billion decrease in total revenues; and • a $770.7 million increase in cash used to purchase USDC to increase our corporate balances .
Net cash provided by operating activities increased by $1.6 billion for the year ended December 31, 2024 as compared to 2023 primarily due to: • an increase in cash as a result of the $3.5 billion increase in total revenue; offset in part by • a $801.7 million increase in cash used to purchase USDC in order to facilitate growth in Prime Financing as well as to provide liquidity for normal business operations; • a $115.2 million increase in cash used for annual employee performance compensation given our strong financial performance during the prior year; • a $106.1 million increase in cash used to pay income taxes; and • an overall increase in other cash expenses as we continue to grow our business.
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.
Non-GAAP Financial Measure In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP financial performance measure, is useful information to help investors evaluate our operating performance because it: enables investors to compare this measure and component adjustments to similar information provided by peer companies and our past financial performance; provides additional company-specific adjustments for certain items that may be included in income from operations but that we do not consider to be normal, recurring, operating expenses (or income) necessary to operate our business given our operations, revenue generating activities, business strategy, industry, and regulatory environment; and provides investors with visibility to a measure management uses to evaluate our ongoing operations and for internal planning and forecasting purposes.
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.
As Prime Financing grows, we will continue to evaluate how to best utilize these resources to help fund the growth of this business. Crypto assets borrowed and borrowings We borrow crypto assets from eligible institutional customers. These borrowings generally have open-ended terms or have a term of less than one year.
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.
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. 102 Table of Contents Primary resources and commitments Cash and cash equivalents and USDC Our cash and cash equivalents and USDC balances consisted of the following (in thousands): December 31, 2024 2023 Cash and cash equivalents Cash equivalents (1) $ 6,607,023 $ 3,682,917 Cash held at banks 1,848,700 1,367,643 Cash held at venues 88,180 88,791 Total cash and cash equivalents $ 8,543,903 $ 5,139,351 USDC (2) USDC loaned (3) $ 168,795 $ 205,645 USDC pledged as collateral (3) 329,832 29,577 USDC not loaned or pledged as collateral 743,181 340,806 Total USDC $ 1,241,808 $ 576,028 __________________ (1) Cash equivalents consists of money market funds.
In addition, we also expect a modest decline in sales and marketing expenses compared to the fourth quarter of 2023.
Additionally, we expect sales and marketing expenses to grow, as compared to the fourth quarter of 2024, primarily due to expected higher USDC rewards expense and variable non-brand marketing spend.
Net cash used in financing activities increased by $15.8 billion for the year ended December 31, 2022 as compared to 2021 primarily due to: • a decrease in customer custodial cash liabilities of $5.6 billion as we saw an overall decline in fiat balances held on our platform due to lower customer trading activity as compared to an inflow of $6.7 billion in the prior year; • a decrease of net $3.4 billion related to the issuance of our Senior Notes and 2026 Convertible Notes, which did not recur in 2022; and 113 Table of Contents • a $165.6 million decrease in proceeds from the issuance of Class A and Class B common stock upon the exercise of stock options as our stock price was at an all-time high in 2021 as compared to 2022 , coupled with our first year as a public company and the associated liquidity event this provided for holders of our stock options.
Financing activities Net cash provided by financing activities increased by $3.6 billion for the year ended December 31, 2024 as compared to 2023 primarily due to: • a $1.9 billion increase in customer custodial cash attributable to increased Trading Volume; 106 Table of Contents • a $1.1 billion net increase in cash due to proceeds from the issuance of our 2030 Convertible Notes less cash paid for associated capped calls; • a $303.5 million decrease in cash outflows in 2024 related to long-term debt repurchases in 2023; and • a $22.5 million net increase in recognized fiat collateral pledged by institutional customers related to Prime Financing loans.
Removed
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.
Added
For all narrative provided in this Item 7, two numbers presented consecutively represent figures for the year ended December 31, 2024 as compared to the year ended December 31, 2023, respectively, unless otherwise noted.
Removed
We acquired key licenses, registrations and launched operations into six new markets. In 2024 Coinbase will focus on three main priorities. First, driving revenue through improving our core trading and USDC. Second, driving utility in crypto with experiments in payments using USDC and Base. Lastly, we will continue to drive regulatory clarity for the industry.
Added
During 2024, we made progress against our goals of driving revenue growth, crypto utility, and regulatory clarity. We advanced the crypto economy by deepening institutional adoption, scaling international growth, and expanding real-world utility.
Removed
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.
Added
Our investments in core products like derivatives and Coinbase One, as well as our focus on global expansion drove revenue growth, while innovations such as USDC rewards showcased the power of onchain finance. For the year ended December 31, 2024, our net revenue was $6.3 billion, including $4.0 billion in transaction revenue and $2.3 billion in subscription and services revenue.
Removed
MTUs declined for the year ended December 31, 2023 as compared to 2022 due to a 0.8 million decrease in staking users driven by updates to our staking service, which required users to manually opt-in to certain networks within a notice period and a 0.4 million decrease in trading users in line with lower Trading Volume.
Added
For the year ended December 31, 2023, our net income was $0.1 billion and Adjusted EBITDA was $1.0 billion. For 2025, we believe that we are well-positioned to drive revenue growth across all macroeconomic environments, and we remain committed to advancing regulatory clarity. Despite multiple Federal Funds Rate decreases in late 2024, future interest rate decreases are not certain.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

27 edited+22 added−8 removed7 unchanged
Biggest changeSee 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.
Biggest changeOther (Income) Expense, Net of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for losses on foreign exchange, net for the years ended December 31, 2024 and 2023. If an adverse 10% foreign currency exchange rate change was applied to the largest foreign currency exposure (e.g.
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.
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.
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.
Market 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.
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.
As of December 31, 2024 and 2023, 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.
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.
Accordingly, crypto asset price risk could adversely affect our operating results. In particular, our future profitability may depend upon the market price of Bitcoin, Ethereum, and Solana, 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.
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.
S ee our 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, 2024, 2023, and 2022.
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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk to our f inancial 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, liabilities, and equities are held for purposes other than trading.
A decline in the market price of Bitcoin, Ethereum and other crypto assets has had and could in the future have an adverse effect on our earnings, the carrying value of our crypto assets, and our future cash flows. This may also affect our liquidity and our ability to meet our ongoing obligations.
A decline in the market price of Bitcoin, Ethereum, Solana, and other crypto assets has in the past had and could in the future have an adverse effect on our earnings and our future cash flows. This may also affect our liquidity and ability to meet ongoing obligations.
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.
These funds consist of cash deposits and money market funds, and therefore the fair value of our cash and 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, especially the cash equivalents, may be significantly impacted.
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.
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 our subscription products and services, and such revenue has grown over time.
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.
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 fund liabilities, and intercompany transactions where the transaction currency is different from a subsidiary’s 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.
We have experienced and will continue to experience fluctuations in our results of operations and cash flows as a result of changes in foreign currency exchange rates, including from 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.
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.
Treasury repurchase agreements, 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.
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.
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. 111 Table of Contents As of December 31, 2024 and 2023 , our strategic equity investments in privately held companies were $374.2 million and $343.0 million, respectively.
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.
Interest Rate Risk Our exposure to changes in interest rates primarily relates to interest earned on our cash and cash equivalents and customer custodial funds and from our arrangement with Circle Internet Financial (“Circle”).
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 .
Adjustments to the fair value of our investments are recorded in Other (income) expense, net in our Consolidated Statements of Operations. During the years ended December 31, 2024 and 2023 , we recognized immaterial impairment expense related to our strategic investments in privately held companies.
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.
We also earn stablecoin revenue from an arrangement with Circle. Interest income is earned by Circle on USDC reserve balances held. Circle reported that, as of December 31, 2024, underlying reserves were held in cash within segregated accounts titled for the benefit of USDC holders and a government money market fund that held cash, short-duration U.S. Treasuries, and overnight U.S.
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.
Summary of Significant Accounting Policies — Investments and 13. Fair Value Measurements of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K .
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.
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, 2024 and 2023, it would not have a material impact on our financial results. Our international operations expose us to exchange rate fluctuations otherwise.
Derivatives , of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K. Equity investment risk We hold strategic investments in privately held companies in the form of equity securities without readily determinable fair values in which we do not have a controlling interest or significant influence.
Equity Investment Risk We hold strategic investments in privately held companies in the form of equity securities without readily determinable fair values in which we do not have a controlling interest or significant influence.
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.
A hypothetical 200 basis points increase or decrease in average interest rates applied to our average month end cash equivalents balances for the years ended December 31, 2024 and 2023 , would have resulted in an impact of $165.8 million and $122.9 million, r espectively, on interest earned on these funds.
As 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.
Derivatives of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. As of December 31, 2024 and 2023, a hypothetical 10% increase or decrease in the fair value of these Other Derivatives positions would not have a material impact on our Consolidated Financial Statements.
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
For more information on our derivatives, see Notes 2. Summary of Significant Accounting Policies — Derivative contracts , 4. Collateralized Arrangements and Financing , 6. Accounts Receivable, Net, 11. Derivatives, and 12. Other Consolidated Balance Sheets Details of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 114
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.
A hypothetical 10% increase or decrease in crypto asset prices applied to the value of our Crypto assets held for operations as of December 31, 2024 and 2023, and applied to the simple average of our gross inflows and outflows of 112 Table of Contents these assets for their weighted average period outstanding during 2024, would not have a material impact on our Consolidated Financial Statements.
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.
A hypothetical 200 basis points increase or decrease in average interest rates applied to daily USDC reserve balances held by Circle for the years ended December 31, 2024 and 2023, would have resulted in an impact of $387.8 million and $294.2 million, respectively, on stablecoin revenue . 110 Table of Contents Foreign Currency Risk Foreign currency transaction risk Revenues, expenses, and financial results of our foreign subsidiaries are recorded in the functional currency of these subsidiaries.
From time to time, we may enter into derivatives or other financial instruments in an attempt to hedge our exposure to foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations. Additionally, the volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy.
From time to time, we may enter into derivatives or other financial instruments in an attempt to hedge our exposure to foreign currency exchange risk. No such instruments were outstanding as of December 31, 2024 and 2023 or during the year ended December 31, 2024. See Note 16.
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.
Such fluctuations could have a material impact on our future results of operations and cash flows, the impact of which is difficult to predict as it depends on many factors that we cannot forecast with reliable accuracy, including the volume and nature of our transactions and the particular currencies in which these transactions are denominated.
Removed
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.
Added
The Federal Reserve has adjusted the Federal Funds Rate significantly in recent years in an effort to co ntrol inflation, raising it from a low of under 0.1% as of March 2022 to a peak of 5.33% from July 2023 to September 2024, followed by declines to arrive at 4.33% a s of December 31, 2024.
Removed
Foreign currency risk Foreign currency transaction risk Revenues, expenses, and financial results of our foreign subsidiaries are recorded in the functional currency of these subsidiaries.
Added
This activity reflects an increase of over 500 basis points, followed by a decrease of nearly 100 basis points, and as a result, we believe additional significant changes in interest rates are reasonably possible.
Removed
Market volatility and other risks associated with derivatives We have exposure to derivatives and related hedges measured at fair value.
Added
The gross increase between December 31, 2022 and December 31, 2024, a period which we currently deem to be a reasonable proxy for near term future changes in interest rates, was approximately 200 basis points.
Removed
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.
Added
In addition to the exposures described above, we hold crypto assets for various reasons. As of December 31, 2024 , we held the following crypto assets: $1.6 billion held for investment; $261.1 million that were borrowed; $82.8 million held for operations; and $767.5 million held as collateral.
Removed
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
In addition, as of December 31, 2024, customers had pledged $178.6 million of crypto assets that are not recognized as collateral. See Note 2. 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 further discussion of these different categories of assets.
Removed
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
Beginning on January 1, 2024, as a result of our adoption of ASU 2023-08, we changed how we value and present crypto assets held in our Consolidated Balance Sheets and thus there are no comparable figures reported in our Consolidated Balance Sheets as of December 31, 2023.
Removed
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.
Added
However, prior to adoption, we classified our crypto assets held according to these same categories and have utilized these balances in preparing the following disclosures. Crypto assets held for investment are primarily held long term, and historically, we have not attempted to reduce our market risk exposure associated with these crypto assets.
Removed
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.
Added
Crypto asset prices have been volatile, as demonstrated by the one year historical volatility of Bitcoin and Ethereum of approximately 50% implied from the annualized standard deviation of daily price returns observed in the past 24 months.
Added
A hypothetical 50% increase or decrease in crypto assets prices as of December 31, 2024 and 2023 would result in a $776.5 million and $514.0 million impact, respectively, to the value of our Crypto assets held for investment and would have, under ASU 2023-08, been recorded as a gain or loss in our Consolidated Statements of Operations.
Added
Our market risk exposure on all remaining categories of crypto assets that we hold is limited, either due to their short-term nature or to naturally offsetting positions.
Added
Crypto assets held for operations are received as a form of payment and are converted to cash or used to fulfill expenses, primarily blockchain rewards, nearly immediately, and therefore are subject to limited market risk.
Added
Our market risk exposure on Crypt o assets borrowed and Crypto assets held as collateral is limited through naturally offsetting positions o f the crypto asset borrowings and obligation to return crypto asset collateral which contain embedded derivatives that are remeasured each reporting period. See — Borrowings and related collateral derivative positions below.
Added
Similarly, we do not have market risk exposure on crypto assets received but not recognized as collateral as we are obligated to return that collateral. Market Risk of Derivatives We have exposure to derivatives measured and recorded at fair value.
Added
Strategic derivative positions In certain market conditions, we may opportunistically employ derivative strategies within a disciplined risk management framework to attempt to hedge our exposure to foreign currency or crypto assets held for investment. We did not have any such positions as of December 31, 2024 or 2023.
Added
Our remaining derivative positions, including all of those held during the periods presented, arise from our operations and reflect a strategy of largely mitigating these remaining exposures through naturally offsetting positions, regardless of whether hedge accounting is achieved. See below for a discussion of these derivatives.
Added
Borrowings and related collateral derivative positions Our market risk exposure on derivative crypto asset borrowings and obligations to return crypto asset collateral (when combined with their host contracts, “Gross Financing Derivatives”) is naturally offset, at least in part, by the associated non-derivative crypto assets borrowed, crypto assets held as collateral, and crypto asset loan receivables originated with borrowed assets, all of which are recorded and held at fair value.
Added
The following table summarizes our Gross Financing Derivatives and net exposures after considering the naturally offsetting non-derivative positions, related to our crypto asset borrowings and associated collateral (“Net Financing Positions”) (in thousands): December 31, 2024 2023 Gross Financing Derivatives $ 1,067,594 $ 416,988 Net Financing Positions $ — $ 73 The following table presents the impact of changes in fair value of the derivatives noted above when considered gross and net of the naturally offsetting non-derivative positions in our Consolidated Statements of Operations (in thousands): Year Ended December 31, 2024 2023 Losses on Gross Financing Derivatives (1) $ (114,521) $ (103,338) Losses on Net Financing Positions (2) $ — $ (5,016) __________________ (1) Gains and losses on derivatives are recorded in our Consolidated Statements of Operations in the locations shown in Note 11.
Added
Derivatives of the Notes to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. (2) As of January 1, 2024, the date of our adoption of ASU 2023-08, net gains and losses after considering the associated naturally offsetting non-derivative positions are recorded in Transaction expense in the Consolidated Statements of Operations.
Added
Prior to adoption of ASU 2023-08, net gains and losses after considering the naturally offsetting non-derivative positions were recorded in Other operating expense, net in the Consolidated Statements of Operations. 113 Table of Contents As of December 31, 2024 and 2023, a hypothetical 50% increase or decrease in the fair value of these derivative positions, after considering the associated naturally offsetting positions, would not have a material impact on our Consolidated Financial Statements.
Added
This hypothetical 50% is calculated as discussed above under Market Risk of Crypto Assets , as the fair value of these derivatives is also derived primarily from the volatility of Bitcoin and Ethereum over a similar period.
Added
Other derivative positions Our market risk exposure to derivatives arising from accounts receivable and payable denominated in crypto assets (when combined with their host contracts, “Other Derivatives”) represents unmitigated exposure. However, these assets and liabilities are short-term in nature.
Added
The following table summarizes these Other Derivatives exposures, on a gross basis, as the receivables and payables may be unrelated (in thousands): December 31, 2024 2023 Gross Other Derivatives $ 228,712 $ 65,082 The following table presents the impact of changes in fair value of the derivatives noted above in our Consolidated Statements of Operations (in thousands): Year Ended December 31, 2024 2023 Gains on Gross Other Derivatives (1) $ 83,269 $ 37,031 __________________ (1) Gains and losses on derivatives are recorded in our Consolidated Statements of Operations in the locations shown in Note 11.

Other COIN 10-K year-over-year comparisons