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DERIVATIVES (Tables) | 6 Months Ended
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Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Description of derivatives and related hedge accounting designation | The following outlines the Company’s derivatives and the related hedge accounting designation, as applicable:
Type of Derivative | Description of Derivative | Location of Host Contract and Derivative on Balance Sheets
Crypto asset borrowings(1) | The Company borrowed crypto assets that resulted in the obligation to deliver a fixed amount of crypto assets in the future. | Crypto asset borrowings
Accounts and loans receivable denominated in crypto assets | Accounts receivable denominated in crypto assets: The Company provided services for which, under the contract, the customer pays in crypto assets. The amount of crypto assets are fixed at the time of invoicing. Crypto asset loans receivable: The Company lends crypto assets to institutions. The amount of crypto assets are fixed at the time of loan origination. In both of the above cases, the right to receive fixed amounts of crypto assets consists of a receivable host contract and an embedded forward contract to purchase crypto assets. | Accounts and loans receivable, net of allowance
Other payables denominated in crypto assets | The Company entered into arrangements that result in the obligation to deliver a fixed amount of crypto assets in the future. | Accrued expenses and other current liabilities
Crypto asset futures(1) | The Company entered into short positions on futures contracts to minimize the exposure on the change in the fair value price of crypto assets held. | Accounts and loans receivable, net of allowance
Crypto assets pledged as collateral | The Company enters into certain borrowing arrangements that require the Company to post collateral in the form of crypto assets. If the lender has the right to use the crypto asset collateral, the Company presents the collateral pledged as a right to receive a fixed amount of crypto assets. | Prepaid expenses and other current assets
__________________ (1) For risk management purposes, the Company applies hedge accounting using these derivative instruments in qualifying fair value hedges to primarily hedge the fair value exposure of crypto asset prices.
Schedule of the notional amount of derivative contracts outstanding | The following table summarizes the notional amounts of derivative instruments outstanding, measured in U.S. dollar equivalents (in thousands):
| June 30, |  | December 31,
| 2023 |  | 2022
Designated as hedging instrument |  |  |
Crypto asset borrowings with embedded derivatives | $ | 119,478 |  |  | $ | 80,999 |
Crypto asset futures(1) | — |  |  | 136,230 |
Not designated as hedging instrument |  |  |
Crypto asset borrowings with embedded derivatives | — |  |  | 70,462 |
Accounts and loans receivable denominated in crypto assets | 30,033 |  |  | 101,598 |
Other payables denominated in crypto assets | 16,553 |  |  | 4,267 |
Crypto asset futures(1) | 187 |  |  | 12,462 |
Crypto assets pledged as collateral | 23,082 |  |  | 13,103 |
Other | 1,050 |  |  | — |
__________________ (1) Derivative transactions are measured in terms of the notional amount; however, this amount is not recorded on the condensed consolidated balance sheets and is not, when viewed in isolation, a meaningful measure of the risk profile of the derivative instruments. The notional amount is generally not exchanged, but is used only as the underlying basis on which the value of exchange payments or settlement under these contracts are determined. The following tables summarize information on derivative assets and liabilities that are reflected on the Company’s condensed consolidated balance sheets, by accounting designation (in thousands):
| Gross Derivative Assets |  |  |  | Gross Derivative Liabilities |  |
June 30, 2023 | Not Designated as Hedges |  | Designated as Hedges |  | Total Derivative Assets |  |  |  | Not Designated as Hedges |  | Designated as Hedges |  | Total Derivative Liabilities |  |
Crypto asset borrowings with embedded derivatives(1) | $ | — |  |  | $ | 45 |  |  | $ | 45 |  |  |  |  | $ | 1,749 |  |  | $ | 23,321 |  |  | $ | 25,070 |  |  |
Accounts and loans receivable denominated in crypto assets | 13,099 |  |  | — |  |  | 13,099 |  |  |  |  | 9 |  |  | — |  |  | 9 |  |  |
Other payables denominated in crypto assets | 4,349 |  |  | — |  |  | 4,349 |  |  |  |  | 3,204 |  |  | — |  |  | 3,204 |  |  |
Crypto assets pledged as collateral | 1,749 |  |  | — |  |  | 1,749 |  |  |  |  | — |  |  | — |  |  | — |  |  |
Other | 1 |  |  | — |  |  | 1 |  |  |  |  | 2 |  |  | — |  |  | 2 |  |  |
Total fair value of derivative assets and liabilities | $ | 19,198 |  |  | $ | 45 |  |  | $ | 19,243 |  |  |  |  | $ | 4,964 |  |  | $ | 23,321 |  |  | $ | 28,285 |  |  |
| Gross Derivative Assets |  |  |  | Gross Derivative Liabilities |  |
December 31, 2022 | Not Designated as Hedges |  | Designated as Hedges |  | Total Derivative Assets |  |  |  | Not Designated as Hedges |  | Designated as Hedges |  | Total Derivative Liabilities |  |
Crypto asset borrowings with embedded derivatives(1) | $ | 2,266 |  |  | $ | — |  |  | $ | 2,266 |  |  |  |  | $ | 657 |  |  | $ | 1,653 |  |  | $ | 2,310 |  |  |
Accounts and loans receivable denominated in crypto assets | 302 |  |  | — |  |  | 302 |  |  |  |  | 9,146 |  |  | — |  |  | 9,146 |  |  |
Other payables denominated in crypto assets | 1,270 |  |  | — |  |  | 1,270 |  |  |  |  | 5,767 |  |  | — |  |  | 5,767 |  |  |
Crypto assets pledged as collateral | — |  |  | — |  |  | — |  |  |  |  | 2,360 |  |  | — |  |  | 2,360 |  |  |
Total fair value of derivative assets and liabilities | $ | 3,838 |  |  | $ | — |  |  | $ | 3,838 |  |  |  |  | $ | 17,930 |  |  | $ | 1,653 |  |  | $ | 19,583 |  |  |
__________________ (1) During the six months ended June 30, 2023, the fees on these borrowings ranged from 1.5% to 5.0%. During the six months ended June 30, 2022, the fees on these borrowings ranged from 0.0% to 7.5%. During the three and six months ended June 30, 2023, the Company incurred $1.2 million and $2.7 million of borrowing fees in crypto assets, respectively. During the three and six months ended June 30, 2022, the Company incurred $1.6 million and $3.0 million of borrowing fees in crypto assets, respectively. Borrowing fees are included in other operating expense (income), net in the condensed consolidated statements of operations. The following amounts were recorded on the condensed consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the condensed consolidated statements of operations in future periods as an adjustment to other operating (income) expense, net (in thousands):
|  |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
June 30, 2023 | Carrying Amount of the Hedged Items |  | Active Hedging Relationships |  | Discontinued Hedging Relationships |  | Total
Crypto assets held | $ | 85,390 |  |  | $ | (27,214) |  |  | $ | 19,688 |  |  | $ | (7,526) |
|  |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
December 31, 2022 | Carrying Amount of the Hedged Items |  | Active Hedging Relationships |  | Discontinued Hedging Relationships |  | Total
Crypto assets held | $ | 201,565 |  |  | $ | (562) |  |  | $ | 670 |  |  | $ | 108 |
Schedule of gains (losses) recorded in income | Gains (losses) on derivative instruments recognized in other operating expense (income), net, in the Company’s condensed consolidated statements of operations were as follows (in thousands):
| Three Months Ended June 30, 2023 |  | Three Months Ended June 30, 2022
| Derivatives |  | Hedged Items |  | Income Statement Impact |  | Derivatives |  | Hedged Items |  | Income Statement Impact
Designated as fair value hedging instruments |  |  |  |  |  |  |  |  |  |  |
Crypto asset borrowings with embedded derivatives | $ | 3,159 |  |  | $ | 333 |  |  | $ | 3,492 |  |  | $ | 355,071 |  |  | $ | (356,416) |  |  | $ | (1,345) |
Crypto asset futures | 5 |  |  | — |  |  | 5 |  |  | 15,678 |  |  | (15,005) |  |  | 673 |
Not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Crypto asset borrowings with embedded derivatives | 196 |  |  | — |  |  | 196 |  |  | 6,626 |  |  | — |  |  | 6,626 |
Accounts and loans receivable denominated in crypto assets | 4,156 |  |  | — |  |  | 4,156 |  |  | (5,350) |  |  | — |  |  | (5,350) |
Other payables denominated in crypto assets | 405 |  |  | — |  |  | 405 |  |  | 2,510 |  |  | — |  |  | 2,510 |
Crypto asset futures | 455 |  |  | — |  |  | 455 |  |  | 1,181 |  |  | — |  |  | 1,181 |
Crypto assets pledged as collateral | (196) |  |  | — |  |  | (196) |  |  | — |  |  | — |  |  | — |
Other | (443) |  |  | — |  |  | (443) |  |  | — |  |  | — |  |  | — |
Total | $ | 7,737 |  |  | $ | 333 |  |  | $ | 8,070 |  |  | $ | 375,716 |  |  | $ | (371,421) |  |  | $ | 4,295 |
| Six Months Ended June 30, 2023 |  | Six Months Ended June 30, 2022
| Derivatives |  | Hedged Items |  | Income Statement Impact |  | Derivatives |  | Hedged Items |  | Income Statement Impact
Designated as fair value hedging instruments |  |  |  |  |  |  |  |  |  |  |
Crypto asset borrowings with embedded derivatives | $ | (88,555) |  |  | $ | 48,933 |  |  | $ | (39,622) |  |  | $ | 360,069 |  |  | $ | (361,340) |  |  | $ | (1,271) |
Crypto asset futures | (43,111) |  |  | 48,491 |  |  | 5,380 |  |  | 13,012 |  |  | (12,262) |  |  | 750 |
Not designated as hedging instruments |  |  |  |  |  |  |  |  |  |  |
Crypto asset borrowings with embedded derivatives | 196 |  |  | — |  |  | 196 |  |  | 6,626 |  |  | — |  |  | 6,626 |
Accounts and loans receivable denominated in crypto assets | 47,080 |  |  | — |  |  | 47,080 |  |  | (10,263) |  |  | — |  |  | (10,263) |
Other payables denominated in crypto assets | 844 |  |  | — |  |  | 844 |  |  | 2,510 |  |  | — |  |  | 2,510 |
Crypto asset futures | 402 |  |  | — |  |  | 402 |  |  | (511) |  |  | — |  |  | (511) |
Crypto assets pledged as collateral | (196) |  |  | — |  |  | (196) |  |  | — |  |  | — |  |  | — |
Other | (603) |  |  | — |  |  | (603) |  |  | — |  |  | — |  |  | — |
Total | $ | (83,943) |  |  | $ | 97,424 |  |  | $ | 13,481 |  |  | $ | 371,443 |  |  | $ | (373,602) |  |  | $ | (2,159) |

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