Coinbase(COIN) - 2023 Q4 - Annual Report

Asset Management - As of December 31, 2023, approximately $9.4 billion worth of assets were held on behalf of individual consumers staked through the platform[92]. - Over $7.4 billion worth of assets were staked by institutional customers through Coinbase Prime as of December 31, 2023[92]. - The aggregate market value of the voting and non-voting stock held by non-affiliates was $12.0 billion as of June 30, 2023[70]. - Coinbase's policies ensure that financial assets held for customers are not subject to claims from general creditors, maintaining a clear custody relationship[103]. - Customer assets are held 1:1 at all times, ensuring no lending or rehypothecation without customer consent[128]. - The company limits hot wallet holdings to no more than 2% of custodied assets, with cold wallet private keys secured in the U.S. and Europe[130]. - The company does not use sub-custodians for digital asset storage, ensuring direct control over customer assets[131]. Regulatory Compliance - Coinbase secured regulatory approval from the Bermuda Monetary Authority in September 2023 to enable perpetual futures for eligible non-U.S. customers[91]. - Coinbase has secured regulatory approvals for its derivatives trading operations, including a BitLicense from NYDFS and regulatory approval to operate as a futures commission merchant[123]. - The company invests significant resources in legal and compliance teams to adapt to the rapidly evolving regulatory landscape affecting the crypto industry[116]. - The company actively engages with global regulatory bodies to ensure compliance with evolving legal and regulatory requirements[136]. - The company has implemented a robust KYC program as part of its anti-money laundering efforts, including ongoing monitoring of customer activities[143]. Product Offerings - The company supports seven staking assets for consumers, including Ethereum (ETH) and Cardano (ADA) as of December 31, 2023[92]. - Coinbase entered into an updated arrangement with the issuer of USDC in August 2023 to support the stablecoin ecosystem[76]. - The company generates revenue through volume-based transaction fees and a subscription product for consumers trading on its platform[64]. - Coinbase One subscription product allows consumers to pay a monthly fee instead of transaction fees, providing various benefits including priority support[95]. - Coinbase offers integrated financing products to select institutions, enabling them to access liquidity for hedging, trading, and working capital needs, with trade financing allowing instant trading on credit[96]. - Coinbase Wallet enables global consumers to engage with Dapps and manage their private keys independently, enhancing user control over their assets[97]. - The company has developed a "web3 wallet" feature that simplifies on-chain activities for users, providing two-layered security and recovery assistance[98]. - Coinbase's developer product suite includes Base, an Ethereum Layer 2 chain, and Coinbase Cloud, which offers APIs and staking infrastructure to accelerate crypto product development[100]. Market Impact and Strategy - The company is focused on restoring confidence in the cryptoeconomy and increasing engagement on its platform following the 2022 events[82]. - The 2022 Events, including the failures of major crypto platforms, have indirectly impacted Coinbase's business and revenue potential through changes in market prices and customer sentiment[101]. - The company anticipates volatility in net income due to changes in fair values of investments, which could materially impact financial statements[907]. Workforce and Culture - As of December 31, 2023, Coinbase had 3,416 employees, reflecting its commitment to hiring and retaining talent in a competitive market[114]. - The company operates as a remote-first organization, allowing access to a larger talent pool for hiring and retention[137]. Security Measures - Coinbase employs industry-leading third-party trade surveillance software to monitor and detect problematic trading activities[87]. - The company has invested in advanced cryptographic techniques to enhance the security of user funds[136].