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COLLATERALIZED ARRANGEMENTS AND FINANCING | 3 Months Ended
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Mar. 31, 2024
Receivables [Abstract] |
COLLATERALIZED ARRANGEMENTS AND FINANCING | COLLATERALIZED ARRANGEMENTS AND FINANCING Loans and related collateral The Company may lend crypto assets borrowed, crypto assets held for investment, crypto assets held for operations, corporate cash, and corporate USDC to eligible institutional customers through Prime Financing. Prime Financing lending arrangements may have open ended or fixed terms, with the exception of trade finance, where the Company enables customers to instantly invest in crypto assets without pre-funding their trade, which transactions are typically settled in one to three days. Crypto asset and fiat loans are recorded in Loan receivables in the Condensed Consolidated Balance Sheets. USDC loaned to customers does not meet derecognition criteria under ASC 860, Transfers and Servicing (“ASC 860”) as the borrower has an obligation to return the same financial assets (USDC) back to the Company in order to release the collateral pledged for the loan. This constitutes a form of continuing involvement with the USDC transferred and therefore the Company maintains effective control over the USDC. USDC loaned remains recorded in corporate USDC in the Condensed Consolidated Balance Sheets. The following table summarizes the Company’s Prime Financing lending arrangements (in thousands):
| March 31, |  | December 31,
| 2024 |  | 2023
Loan receivables |  |  |
Trade finance receivables | $ | 122,817 |  |  | $ | — |
Fiat loan receivables | 210,185 |  |  | 171,196 |
Crypto asset loan receivables | 196,141 |  |  | 22,229 |
Total loan receivables | $ | 529,143 |  |  | $ | 193,425 |
Customer loans not meeting recognition criteria |  |  |
USDC | $ | 268,345 |  |  | $ | 205,645 |
Prime Financing loans are fully collateralized by a customer’s pledged crypto assets, USDC, or fiat, with collateral requirements ranging from 100% to 400% of the fair value of the loan. The Company adheres to strict internal risk management and liquidation protocols for loan counterparty defaults, including restricting trading and withdrawals and liquidating assets in borrowers’ accounts as contractually permitted. If the value of the borrower’s eligible collateral falls below the required collateral requirement, the customer is obligated to deposit additional collateral up to the required collateral level. The Company continuously and systematically monitors the fair value of the related collateral assets pledged compared to the fair value of the related loan receivable, and requires additional collateral pursuant to the contractual terms of the loan agreements. Due to the collateral requirements the Company applies to its loans, the collateral maintenance process, and collateral being held on its own platform, the Company’s credit exposure is significantly limited and no allowance, write-offs or recoveries were recorded against loans receivable for the periods presented. The Company would recognize credit losses on these loans if there were a collateral shortfall and it is not reasonably expected that the borrower will replenish such a shortfall. If the Company receives fiat collateral into a Coinbase controlled collateral wallet, the Company records the collateral in Cash and cash equivalents and a corresponding liability in Obligation to return collateral in the Condensed Consolidated Balance Sheets. If the Company receives USDC or crypto assets as collateral with contractual rights to sell, pledge, or rehypothecate the collateral, the Company records the collateral in corporate USDC or Crypto assets held as collateral, respectively, and a corresponding liability in Obligation to return collateral in the Condensed Consolidated Balance Sheets. Obligation to return collateral, if a crypto asset, is accounted for as a hybrid instrument, with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset. The remeasurement of the crypto assets held as collateral and the obligation to return collateral are recorded net in Transaction expense. If the Company does not obtain control or have the right to sell, pledge, or rehypothecate customer collateral, the collateral is recorded in Safeguarding customer crypto assets and Safeguarding customer crypto liabilities if the collateral is USDC or crypto assets and Customer custodial funds and Customer custodial cash obligations if the collateral is fiat, as the collateral is required to be held on the Company’s platform. The Company’s Crypto assets held as collateral and Obligation to return collateral consisted of the following (in thousands, except units):
| March 31, 2024 |  | December 31, 2023
| Units |  | Fair Value |  | Units |  | Fair Value
Crypto assets held as collateral |  |  |  |  |  |  |
Bitcoin(1) | 1,495 |  |  | $ | 106,610 |  |  | — |  |  | $ | — |
Total held as collateral |  |  | $ | 106,610 |  |  |  |  | $ | — |
Obligation to return collateral |  |  |  |  |  |  |
Fiat | N/A |  | $ | 208,480 |  |  | N/A |  | $ | 1,063 |
Bitcoin | 1,495 |  |  | 106,610 |  |  | — |  |  | — |
Total obligation to return collateral |  |  | $ | 315,090 |  |  |  |  | $ | 1,063 |
Customer collateral pledged, not recognized | nm |  | $ | 1,578,643 |  |  | nm |  | $ | 712,644 |
__________________ nm - not meaningful (1) The cost basis of bitcoin held as collateral as of March 31, 2024 was $75.4 million. The following table summarizes the reconciliation of Crypto assets held as collateral for the three months ended March 31, 2024 (in thousands):
| January 1, 2024 |  | Cumulative Adjustment |  | Collateral Received |  | Collateral Returned |  | Gains(1) |  | Losses(1) |  | March 31, 2024
Crypto assets held as collateral | $ | — |  |  | $ | — |  |  | $ | 90,798 |  |  | $ | (15,374) |  |  | $ | 31,186 |  |  | $ | — |  |  | $ | 106,610 |
__________________ (1)No cumulative realized gains or losses occurred during the period. Borrowings and related collateral To facilitate Prime Financing, the Company may borrow crypto assets from third parties and records the associated liability in Crypto asset borrowings in the Condensed Consolidated Balance Sheets. Crypto asset borrowings that have not been loaned out are recorded in Crypto assets borrowed. Crypto asset borrowings are accounted for as hybrid instruments, with a liability host contract that contains an embedded derivative based on the changes in the fair value of the underlying crypto asset. See Note 13. Derivatives for additional information. As of March 31, 2024 and December 31, 2023, the weighted average annual fees on these borrowings were 2.3% and 2.0%, respectively. See Note 13. Derivatives, for additional details regarding Crypto asset borrowings. The following table summarizes the units, cost basis, and fair value of crypto assets borrowed (in thousands, except units) and the associated crypto asset borrowings:
|  | March 31, 2024 |  | December 31, 2023
|  | Units |  | Cost Basis |  | Fair Value |  | Carrying Value
Crypto assets borrowed |  |  |  |  |  |  |  |
Bitcoin |  | 2,688 |  |  | $ | 112,099 |  |  | $ | 191,573 |  |  | $ | 36,368 |
Ethereum |  | 1,122 |  |  | 2,214 |  |  | 4,093 |  |  | 3,720 |
Solana |  | 55,575 |  |  | 5,198 |  |  | 11,247 |  |  | 3,516 |
Other crypto assets(1) |  | nm |  | 14,247 |  |  | 24,435 |  |  | 1,608 |
Total borrowed |  |  |  | $ | 133,758 |  |  | $ | 231,348 |  |  | $ | 45,212 |
Crypto asset borrowings |  |  |  |  |  |  |  |
Bitcoin |  | 3,040 |  |  | $ | 128,417 |  |  | $ | 216,703 |  |  | $ | 50,679 |
Ethereum |  | 5,601 |  |  | 10,655 |  |  | 20,420 |  |  | 7,059 |
Solana |  | 55,575 |  |  | 5,198 |  |  | 11,247 |  |  | 3,513 |
Other crypto assets(1) |  | nm |  | 14,248 |  |  | 24,435 |  |  | 1,729 |
Total borrowings |  |  |  | $ | 158,518 |  |  | $ | 272,805 |  |  | $ | 62,980 |
__________________ nm - not meaningful (1)Includes various other crypto assets balances, none of which individually represented more than 5% of total crypto assets borrowed and crypto asset borrowings. The following table summarizes the reconciliation of Crypto assets borrowed for the three months ended March 31, 2024 (in thousands):
|  |  | Additions |  | Dispositions |  |  |  |  |  |
| January 1, 2024 |  | Crypto Borrowings Originated |  | Crypto Loans Repaid |  | Crypto Borrowings Repaid |  | Crypto Loans Originated |  | Gains(1) |  | Losses(1) |  | March 31, 2024
Crypto assets borrowed | $ | 45,212 |  |  | $ | 191,436 |  |  | $ | 285,254 |  |  | $ | (77,451) |  |  | $ | (301,168) |  |  | $ | 88,352 |  |  | $ | (287) |  |  | $ | 231,348 |
__________________ (1)No cumulative realized gains or losses occurred during the period. Under the terms of the Company’s borrowing arrangements, the Company may be required to maintain a collateral to loan ratio and pledge fiat, USDC, or crypto assets for crypto asset borrowings. If the lender has the right to use the collateral, or if the collateral is fiat, the Company records the collateral pledged as a right to receive the collateral within Other current assets in the Condensed Consolidated Balance Sheets. USDC pledged as collateral to lenders, where the lender does not have the right to sell, pledge or rehypothecate, is not recorded as assets pledged as collateral as the pledged USDC does not meet the derecognition criteria under ASC 860. This collateral continues to be recorded in USDC in the Condensed Consolidated Balance Sheets. The Company’s corporate assets pledged as collateral against crypto borrowings consisted of the following (in thousands, except units):
| March 31, 2024 |  | December 31, 2023
| Units |  | Fair Value |  | Units |  | Fair Value
Assets pledged as collateral |  |  |  |  |  |  |
USDC | 73,096,425 |  |  | $ | 73,096 |  |  | 51,879,705 |  |  | $ | 51,880 |
Fiat | N/A |  | — |  |  | N/A |  | 1,191 |
Total pledged as collateral |  |  | $ | 73,096 |  |  |  |  | $ | 53,071 |
Assets pledged as collateral not meeting derecognition criteria |  |  |  |
USDC | 221,827,262 |  |  | $ | 221,827 |  |  | 29,577,339 |  |  | $ | 29,577 |

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