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INCOME TAXES
 3 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
For the three months ended March 31, 2024, the Company calculated the tax provision using a discrete effective tax rate method. Historically, the tax provision was calculated for interim periods using an estimated annual effective tax rate, applied to year-to-date ordinary income. The Company’s estimated annual effective tax rate can fluctuate significantly based on the amount of estimated pretax income or loss in the period. For example, when pretax income is lower, the effect of non-deductible expenses or other discrete items will have a significant impact on the effective tax rate. Therefore, the Company determined the discrete effective tax rate method is the appropriate method for calculating the interim tax provision.
The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 was 18.2% and 52.4%, respectively. The effective tax rate of 18.2% for the three months ended March 31, 2024 was lower than the U.S. statutory rate of 21.0% primarily due to the Company’s deductible stock-based compensation and research and development credits.
As of March 31, 2024, the Company had a net deferred tax asset balance of $879.7 million, compared to $1.3 billion as of December 31, 2023. The decrease resulted from the deferred tax liability of $177.9 million established upon the adoption of ASU 2023-08 and the deferred tax provision of $214.6 million recorded on pretax earnings and other comprehensive income during the quarter.
As of December 31, 2023, the Company had a valuation allowance of $8.7 million recorded against its deferred capital loss tax asset balance of $207.6 million. The Company’s capital loss tax asset is comprised primarily of impairment charges related to crypto assets held and strategic investments made by Coinbase Ventures. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of March 31, 2024, because crypto assets appreciation during the quarter provided more gains to offset losses, management determined that there is sufficient positive evidence to conclude that it is more likely than not that capital loss tax assets are realizable, resulting in a valuation allowance release of $8.7 million for the quarter.