Coinbase Global, Inc. 10-K

Item 1. Business Coinbase Overview Our mission is to increase economic freedom in the world. We build safe, trusted, easy-to-use technology and financial infrastructure products and services that enable any person or business with an internet connection to discover, transact, and engage with crypto assets and decentralized applications. Our products enable customers to access and participate in the cryptoeconomy, a new open financial system built upon crypto, in more than 100 countries and serve as a critical infrastructure layer to web3, a broad category of crypto-powered technologies including self-custody wallets, decentralized apps and services, and open community engagement platforms. The cryptoeconomy and web3 remain in their early days. Crypto asset prices are highly volatile and cyclical. Including the current cycle, we have observed four major crypto asset price cycles since 2010. Each previous cycle has varied in duration ranging from approximately two to four years, and has increased the overall crypto market capitalization from the prior cycle. As shown below, these cycles are visible when viewing the price of Bitcoin, the first and largest crypto asset, over time through December 31, 2022 on a logarithmic scale. Our Business Coinbase offers a safe, trusted, easy-to-use platform that serves as a gateway to the cryptoeconomy for our three customer groups via both custodial and self-custodial solutions: consumers, institutions, and developers. We continue to invest to grow and enhance our technology and product platform to ensure we are best positioned to serve as a one-stop shop to meet our customers’ needs as the cryptoeconomy continues to evolve and web3 develops. Throughout this Annual Report on Form 10-K, we will refer to platform or platforms as our full suite of products and offerings. 7 Table of Contents To support our customers’ needs, our goal is to expand access to a growing breadth and depth of crypto assets and fiat payment rails to our customers and expand access to more product experiences – both proprietary and third party, largely decentralized applications (Dapps). Our asset addition strategy is asset agnostic and we seek to add access to every asset where it is safe and legal to do so. USDC – a leading US dollar stablecoin redeemable 1:1 for US dollars – is an asset whereby we have a unique commercial arrangement and generate income through means other than our customers' engagement with our products and services. We offer rewards on USDC to our customers in order to encourage participation. Consumers We serve as the consumers’ primary crypto account, offering both a custodial solution with the Coinbase application and self-custodied solution with Coinbase Wallet. Our consumers are represented in over 100 countries, with the largest concentration in the United States of roughly 40%, followed by the UK / Europe of roughly 25%. Coinbase App The Coinbase app provides customers a single platform to discover, trade, stake, store, spend, earn, borrow, and use their crypto assets in both our own proprietary and third party product experiences as we enable access to decentralized applications via an integrated web3 wallet. Trading in crypto, inclusive of discovering, buying and selling crypto assets is typically the first step in a consumer’s Coinbase experience. The Coinbase app is designed to serve a wide variety of consumers, whether they are buying their first token or are advanced traders. We offer two trading experiences within the application, a simple trading experience for consumers of any experience level and an advanced trading experience for more sophisticated traders. Simple trading refers to buying and selling cryptocurrencies using the basic interface of the app, and includes value-added services such as fixed price quotes and recurring trades. Our advanced trading experience offers traders access to real-time market information through interactive charts, order books, and a live trade history on the advanced trade view, and other trading tools. We offer two pricing options for our consumers who engage with our crypto trading products. The first option is to pay for trades as they occur with a transparent pricing schedule including a transaction fee and a spread, that get added to the transaction when consumers buy, sell, or convert crypto assets in either a fiat-to-crypto or crypto-to-crypto trade. These transaction fees are fixed as a percentage of volume for simple trading (excluding small transactions which have flat fees), and tiered as a percentage of volume for advanced trading, based on users’ trading volumes on our platform. The second option is through our subscription product, Coinbase One, in which consumers pay a monthly fee, in lieu of a transaction fee, until reaching a certain trading volume threshold. However, for simple trading, a spread still applies to a trade. We do not charge our consumers a separate fee to safely store their crypto assets on our platform. Beyond trading, one of the most popular transactions consumers often engage with is earning a yield on their crypto assets. We enable our customers to earn yield on their crypto assets in multiple ways, including via staking rewards, DeFi yield and other methods unique to certain crypto assets. Certain blockchain protocols, such as Ethereum, rely on staking, an alternative way to validate blockchain transactions. Network participants, in this case Coinbase, can designate a certain amount of their crypto assets on the network to validate transactions and get rewarded in kind from the network. Today, staking crypto assets is a technical challenge for most consumers. Staking independently requires a participant to run their own hardware, software, and maintain close to 100% up-time. We provide a true, on-chain proof-of-stake service, which reduces the complexities of staking and allows our consumers to maintain full ownership of their crypto assets while earning staking rewards. In return, we earn a commission on all staking rewards received. 8 Table of Contents We seek to expand proprietary product experiences within the Coinbase app in which consumers can engage and transact with crypto. Today, we also offer our consumers the ability to do peer-to-peer payments, remittances, direct deposit, spend through our Coinbase Card, a Coinbase branded debit card, and the ability to pledge certain crypto assets as collateral for a USD loan. No consumer assets, fiat nor crypto are used to fund loans. All consumer loans are funded with Coinbase corporate cash. In addition to first party products, where customers’ crypto is stored on their behalf by Coinbase, we offer two wallet products: web3 wallet and Coinbase Wallet. Web3 Wallet Consumers have the opportunity to access third party products via adding a “web3 wallet” within the Coinbase app. The web3 wallet enables our customers to interact with certain Dapps, including transacting on decentralized exchanges or accessing art and entertainment services. This product provides consumers with the convenience to easily access and interact with Dapps, and shares the responsibility of knowing and storing the customer’s security key between the consumer and Coinbase, making wallet recovery possible. We monetize by charging a fee to engage in certain transactions on decentralized exchanges. Coinbase Wallet We also offer a software product, Coinbase Wallet, to consumers in over 100 markets, 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. The Coinbase Wallet product experience has similarities to the web3 wallet with key distinctions being consumers have sole control over their private keys and seed phrase, and have access to a more expansive set of assets and use cases within web3. We monetize certain transactions conducted via Dapps such as charging a fee through fiat-to-crypto transactions, and/or a fee to engage in transactions on decentralized exchanges. Institutions Our strategy is to provide institutions an integrated trading and financing product platform that provides capital efficiency across spot and derivatives markets to interact with the cryptoeconomy and web3. Today, our institutional products are custodial offerings. We expect to expand first party products and services. In addition, we seek to expand our products to provide institutions streamlined access to web3 and decentralized applications over time. Institutional customers comprise a variety of customer types, including but not limited to market makers, asset managers and asset owners, hedge funds (including many of the world’s largest hedge funds by reported assets under management), banks, wealth platforms, registered investment advisors, payment platforms, and public and private corporations. We serve institutions through two primary products. Coinbase Prime is a comprehensive platform to serve all institutions’ spot crypto needs on an agency basis. We also provide market infrastructure in the form of trading venues via the Coinbase Spot Market and the Coinbase Derivatives Exchange. Coinbase Prime Coinbase Prime offers trading, storage, transfers, staking and financing to institutions through one integrated platform. Through Coinbase Prime, institutions have access to deep pools of liquidity across the crypto marketplace and best price execution due to our ability to route trades through a network of connected trading venues, including the Coinbase Spot Market. We offer volume-based pricing and charge a transaction fee for every matched trade. 9 Table of Contents Underpinning Coinbase Prime is an institutional-grade custody platform with a highly secure cold storage solution made available both within the US and globally. We charge a separate fee based on the total assets stored in custody on our platform. Institutions also have the opportunity to earn rewards on their crypto assets held and we offer delegated, true, on-chain, proof-of-stake services for supported crypto assets. Institutions maintain full ownership of their crypto assets while earning staking rewards. Similar to our consumers, we earn a commission on staking rewards received. Increasingly important to institutions is the ability to have access to financing products. 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 trade financing whereby we advance funds and settle on behalf of credit-eligible customers, removing a key point of friction by allowing customers to instantly trade on credit and settle within a few days. We earn interest income on loans outstanding. Going forward, we may seek to provide advanced risk management services where Coinbase acts principally to facilitate transactions. We have established policies and procedures to mitigate conflicts of interests that may arise in these types of transactions. Markets We provide market infrastructure in the form of trading venues to trade spot via the Coinbase Spot Market and derivatives via the Coinbase Derivatives Exchange. We recently added our first regulated derivatives offerings, the Nano Bitcoin Futures and Nano Ethereum Futures contracts, on our Coinbase Derivatives Exchange. Coinbase is the first crypto-native platform to gain traction in regulated derivatives. Today, we offer other derivatives intermediaries the ability to trade on our derivatives exchange. Pending regulatory approval, we look forward to making these derivative products available directly to our customers. We look to expand access to crypto markets by listing more trading pairs on our Spot Market and Derivatives Exchange. Developers Our Developer product suite includes some of our most nascent products, including Coinbase Cloud and Coinbase Pay. Coinbase Cloud offers crypto payment or trading APIs, data access, and staking infrastructure. These tools allow companies 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. Our Competition The cryptoeconomy remains highly fragmented, intensely competitive, and subject to increasingly global regulatory scrutiny and oversight. We face significant competition from a variety of companies around the world – ranging from crypto native companies, including decentralized exchanges, to large traditional financial services incumbents and financial technology providers. The competitive landscape varies significantly by geography. For example, the traditional financial services and financial technology companies we compete against are largely US and European based and operate under the same evolving US regulatory landscape that we do. For consumers, we compete with a range of companies that solely focus on the crypto market, as well as financial technology and brokerage firms. These financial technology and brokerage firms have varying business models and offer an overlapping, but often more limited, product suite and choice of crypto assets. 10 Table of Contents For USDC, we compete against a range of other stablecoins and fiat currencies around the world. For institutions, we primarily compete in the US with other crypto-focused companies, although some traditional financial incumbents offer solutions that are more limited in scope. Our institutional business operates the Coinbase Spot Market, which competes with a variety of crypto exchanges. Our spot market also competes with decentralized exchanges which have grown in popularity in recent years. Globally we also compete against crypto native companies, some of which operate primarily in international markets that are subject to less regulatory oversight. As a result, their product offering is different, with the ability to offer a wider range of crypto assets and product experiences such as higher leverage financing products that appeal to sophisticated traders. Across our product portfolio, we differentiate ourselves through our cohesive ecosystem of products and services that address the distinct needs of our customers, our full-stack technology platform purpose-built for the cryptoeconomy, significant investments in regulatory compliance and licensure, advanced cryptography and security expertise, and our emphasis on accessibility, trust, and ease of use. We invest in user research, design, and experience to continuously improve the ability of our products to address our users’ needs. Additionally, we have continued to invest in the trust foundations of our business. We have built and expanded the use of advanced cryptographic techniques such as multi-party computation (MPC), an innovative approach to securing user funds, within the business. 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 crypto economy, such as staking and governance, and launch additional products and services further separates us from our competition. See Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for a more comprehensive description of risks related to competition. Trusted Crypto Platform The failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks, Voyager and Three Arrows Capital, in 2022 (the “2022 Events”) has impacted and may continue to impact the broader cryptoeconomy. The full extent of these impacts may not yet be known. Impacts include, but are not limited to, the consequent and ongoing financial distress and bankruptcy of certain crypto market participants, loss of confidence in the broader cryptoeconomy, reputational harm to crypto asset platforms generally, increased negative publicity of the broader cryptoeconomy, heightened scrutiny by regulators and lawmakers and calls for increased regulation of crypto assets and crypto asset platforms. We have had no material direct impact to our business, financial condition, customers or counterparties from the 2022 Events; however, the 2022 Events did cause a change to crypto market prices, crypto market volatility and customer sentiment, and each of these drivers do indirectly impact our business and our revenue potential. We do not have any known material financial exposure to other cryptoeconomy participants that faced insolvency and liquidity issues, experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets, allegedly mishandled customer funds, or experienced significant corporate compliance failures in connection with the 2022 Events. 11 Table of Contents Following the 2022 Events, one of our highest priorities is to restore confidence and interest in the cryptoeconomy and maintain and increase engagement on our platform. We believe our safe and trusted crypto platform positions us well to achieve this, particularly because we have policies and procedures and take steps to help ensure proper safeguarding of crypto assets we hold. We hold crypto assets on behalf of customers. We also hold crypto assets for our own investment and operating purposes. For example, in certain instances we may use corporate crypto assets for wallet orchestration to facilitate transfers across our hot and cold wallets. Safely securing digital forms of value presents distinct challenges relative to securing analog assets. Possession of the private key (akin to a “password”) for a crypto asset generally determines who controls such asset. Protecting private keys from unwarranted access and theft is critically important because once the private key is taken control over the crypto asset is typically lost. We have pioneered industry-leading standards for managing private cryptographic keys and use sophisticated cybersecurity technologies such as multi-party computation to safeguard a wide range of crypto assets. These investments enable us to more effectively secure and transfer crypto assets using our platform. We place great importance on safeguarding customer crypto assets. We hold our customer assets 1:1 at all times, which means we do not lend or rehypothecate customer assets, and do not act on customer assets or engage in fractional reserve banking with respect to customer assets without customer consent. For consumer and institutional users who participate in our staking program, their staked assets remain their assets. Staking does not affect ownership of staked assets, and customers have the same custody relationship with us whether or not they stake. Also, when users stake their assets through Coinbase, the rewards they earn for helping to secure the network are directly tied to the rewards returned by on-chain network protocols and marketplaces, which Coinbase passes through minus a disclosed fee. Coinbase does not unilaterally determine what reward to pay or whether to pay a reward. 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. For Coinbase entities that provide crypto trading services, such as Coinbase, Inc., crypto assets are held in an omnibus manner on the blockchain and separated using a ledger system. 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. 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 are not property of Coinbase and not subject to claims of our general creditors. We have and strive to maintain strong internal controls and risk management policies and procedures. As our business and the industry continues to grow and we expand our products and services, we will continue to update and strengthen such internal controls, policies and procedures, as well as work with our partners to do the same in order for us to remain an industry leader and a trusted platform. Additionally, we have procedures to process redemptions and withdrawals expeditiously, subject to the terms of applicable user agreements. For additional information, see Note 10 . Customer Assets and Liabilities 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. 12 Table of Contents 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 crypto asset trading platforms. For example, we have a crypto asset investment policy that allows us to invest up to 10% of our quarterly net income into a diversified portfolio of crypto assets. We execute these trades away from our crypto asset trading platform to avoid any conflict of interest with our customers. Additionally, Coinbase is committed to providing a fair, transparent, and equitable experience across our suite of trading products. Crypto assets and use cases are rapidly expanding and Coinbase seeks to offer our consumers access to all assets and use cases where it is safe and legal to do so. For example, we take a number of steps to mitigate conflicts in our digital asset listing process. We have a digital asset support committee that is composed of senior leaders from our product, legal, compliance, finance, and accounting departments. The digital asset support committee reviews the relevant aspects of any asset escalated to it in connection with a listing on our trading platform in accordance with our digital asset support policies and procedures that are designed to mitigate conflicts. Only the digital asset support committee 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. 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. 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. We have also invested in a range of technologies that are designed to help identify and prevent harmful activity on our platform, including fraud or account takeovers. Human Capital Powering the cryptoeconomy is no small task, and requires hiring, developing and retaining the most talented individuals who are deeply passionate about our mission to increase economic freedom and who are excited to build new products and services. We work incredibly hard in pursuit of ambitious goals. We signal who will thrive at Coinbase by being transparent about our culture through our publicly available culture document. Our culture has and will 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 13 Table of Contents We are a remote-first company. We believe that allowing our employees to work in the location that best suits them provides us access to a large talent pool and a sustained advantage in hiring and retaining employees in the United States and worldwide. We offer competitive, transparent compensation and unique learning. We conduct an annual market review to ensure our compensation maintains in line with our competitive compensation philosophy. We have single, transparent pay targets for the vast majority of our roles - eliminating most compensation negotiations - and provide one-year equity grants for the vast majority of employees. 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 quarterly pulse surveys to continuously optimize our culture, employee engagement, risk management, and productivity. 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, 2022, we had 4,510 employees. In January 2023, we announced a reduction to our workforce by approximately 950 employees. Corporate Philanthropy At the core of our mission is the philosophy that all people should have access to a more fair, accessible, efficient, and transparent financial system to support economic freedom. To this end, we subscribed to Pledge 1%, committing 1% of equity, profits and employee time to charitable endeavors to expand economic freedom specifically through crypto and blockchain applications. Government Regulation We operate globally in a complex and rapidly evolving regulatory environment and are subject to a wide range of laws and regulations enacted by U.S. federal, state, and local and foreign governments and regulatory authorities. The breadth of laws, rules, and regulations we are subject to include financial services and banking, consumer protection, money transmission, stored value and prepaid access, electronic payments, payment services, securities, commodities, derivatives and unclaimed property, as well as bespoke digital asset and cryptocurrency laws that have been promulgated in some jurisdictions. These laws, rules, and regulations evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the cryptoeconomy, require us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that regulators may disagree with our conclusions. We are not regulated by the Office of the Comptroller of the Currency. In addition, our trading platform is not an SEC-regulated national securities exchange or alternative trading system. Globally, we are subject to increasingly 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. These descriptions are not exhaustive, and these laws, regulations and rules (and the interpretations thereof) frequently change and are increasing in number. The laws and regulations to which we are subject, including those pertaining to digital assets and crypto assets, are rapidly evolving and increasing in scope. Therefore, we monitor these areas closely and invest significant resources in our legal, compliance, product, and engineering teams to ensure our business practices evolve to help us comply with the current laws, regulations, and legal standards to which we are subject, as well as to plan and prepare for changes in interpretations thereof, as well as additional laws, regulations and legal standards that are introduced in the future. 14 Table of Contents Anti-money laundering and counter-terrorist financing We are subject to various anti-money laundering and counter-terrorist financing laws, including the Bank Secrecy Act (the “BSA”) in the United States, and similar laws and regulations abroad. 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 addition, the BSA requires us to comply with certain customer due diligence requirements as part of our anti-money laundering obligations, including developing risk-based policies, procedures, and internal controls reasonably designed to verify a customer’s identity. Many states and other countries impose similar and, in some cases, more stringent requirements related to anti-money laundering and counter-terrorist financing. We have implemented a compliance program designed to prevent our platform from being used to facilitate money laundering, terrorist financing, and other illicit activity in countries, or with persons or entities, included on designated lists promulgated by the Office of Foreign Assets Control (“OFAC”), and equivalent foreign authorities. Our compliance program includes policies, procedures, reporting protocols, and internal controls, and is designed to address legal and regulatory requirements as well as to assist us in managing risks associated with money laundering and terrorist financing. Anti-money laundering regulations are constantly evolving and vary from jurisdiction-to-jurisdiction. We continuously monitor our compliance with anti-money laundering and counter-terrorist financing regulations and industry standards and implement policies, procedures, and controls in light of the most current legal requirements. Money transmission, stored value, and virtual currency business activity In the United States, we have obtained licenses to operate as money transmitters or the equivalent in the states where such licenses or equivalent are required to conduct our business, as well as in the District of Columbia and Puerto Rico. In addition, we have obtained a BitLicense from the New York State Department of Financial Services (“NYDFS”). 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, capital requirements including our aggregate net worth, prudential compliance obligations associated with customer notice and disclosure, reporting and recordkeeping requirements applicable to the company, as well as control persons and inspection and examination by state regulatory agencies. These state licensing laws also cover matters such as regulatory approval of controlling stockholders, directors, and senior management of the licensed entity. Outside the United States, we have obtained licenses to provide crypto-asset custody and trading from the German Federal Financial Supervisory Authority. We are also registered as a crypto asset exchange service provider in Japan which provides crypto-asset and first-party payments services to Japanese customers pursuant to registration with the Kanto Local Finance Bureau of the Ministry of Finance of Japan, covering both crypto-asset and first-party payment services. In Singapore, we operate under the Payment Services Act and are supervised by the Monetary Authority of Singapore (“MAS”). We are presently operating under an In-Principal Approval status subject to MAS final approval to become a Major Payments Institution. Under these licenses and registrations, we are subject to a broad range of rules and regulations including in respect of AML, safeguarding of customer assets and funds, regulatory capital requirements, fit and proper management, operational controls, corporate governance, customer disclosures, reporting and record keeping. 15 Table of Contents 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. 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. 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. Economic and trade sanctions We are required to comply with economic and trade sanctions administered by the United States, the European Union, or E.U., relevant E.U. member states, and other jurisdictions in which we operate. Economic and trade sanctions programs administered by OFAC and by certain foreign jurisdictions prohibit or restrict transactions to or from (or dealings with or involving) certain countries, regions, governments, and in certain circumstances, specified individuals and entities such as narcotics traffickers, terrorists, and terrorist organizations, as well as certain digital currency addresses. Securities In recent years, the Securities and Exchange Commission (“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 - however, there has not been definitive guidance on this point. 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. We have established policies and practices to evaluate each crypto asset we consider for listing or for custody and are a founding member of the Crypto Rating Council, a member-owned and operated organization whose purpose is to assess whether any given crypto assets, or whether the development, issuance, and use of such assets, have characteristics that make them more or less likely to implicate U.S. federal securities laws. We also evaluate all other products and services prior to launch under U.S. federal and applicable international securities laws. Broker-Dealer Our broker-dealer business is operated by both Coinbase Capital Markets and Coinbase Securities, which are registered with the SEC as broker-dealers under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, and in the states in which they conduct business. They are also members of and subject to the rules of the Financial Industry Regulation Authority (“FINRA”). All of our broker-dealer activities are subject to regulation, examination, investigation, and disciplinary action by the SEC, FINRA, and state securities regulators, as well as other governmental authorities and self-regulatory organizations with which they are registered or licensed or of which they are a member. 16 Table of Contents Commodities and derivatives The 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. Commodities Exchange Act of 1936 (the “CEA”). Under the CEA, the CFTC has broad enforcement authority to police market manipulation and fraud in spot commodity markets, including the spot crypto markets. We are subject to such authority with respect to improper trading on our platform. In addition, CFTC regulations and CFTC oversight and enforcement authority apply with respect to futures, swaps, other derivative products, and certain retail leveraged commodity transactions involving crypto assets, including the markets on which these products trade. Separately, security-based swaps are subject to SEC regulation and oversight. In general, we seek to ensure that crypto asset transactions on our crypto asset trading platform do not constitute futures, swaps, security-based swaps, other derivative products, or retail leveraged commodity transactions. Given our novel business model and uncertainty regarding the application of some of these laws and regulations, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements. Separately, our subsidiary, Coinbase Financial Markets, Inc. has applied for registration as a futures commission merchant (“FCM”) with the National Futures Association, and in February 2022, we acquired LMX Labs, LLC, a designated contract market (“DCM”) regulated by the CFTC, in connection with our acquisition of FairXchange, Inc. FCMs and DCMs are subject to numerous regulatory requirements, including strict capital requirements. Prohibitions on bribery and anti-corruption We are subject to regulations imposed by the FCPA in the United States and similar laws in other countries, such as the Bribery Act 2010 in the United Kingdom, or the Bribery Act, which generally prohibit companies and those acting on their behalf from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Some of these laws, such as the Bribery Act, also prohibit improper payments between private entities and persons. Privacy and protection of user data We are subject to a number of laws, rules, directives, and regulations relating to the collection, use, retention, security, processing, and transfer of personally identifiable information about our customers and employees in the countries where we operate. Our business relies on the processing of personal data in many jurisdictions and the movement of data across national borders. As a result, much of the personal data that we process, which may include certain financial information associated with individuals, is regulated by multiple privacy and data protection laws and, in some cases, the privacy and data protection laws of multiple jurisdictions. In many cases, these laws apply not only to third-party transactions, but also to transfers of information between or among us, our subsidiaries, and other parties with which we have commercial relationships. 17 Table of Contents Consumer protection The Federal Trade Commission, or FTC, the Consumer Financial Protection Bureau, or CFPB, and other U.S. federal, state, and local and foreign regulatory agencies regulate financial products, including money transfer services related to remittance or peer-to-peer transfers. 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. For example, all persons offering or providing financial services or products to consumers in the United States, directly or indirectly, can be subject to enforcement actions related to the prohibition of UDAAPs. The CFPB has enforcement 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 such as Regulation E, 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. Recent market disruptions have led to numerous proposals among consumer protection focused agencies including by the FTC and CFPB for changes in the regulation of the crypto industry. New laws or regulations, or changes in enforcement of existing laws or regulations could require us to change certain business practices related to consumer disclosures, marketing and operational features related to payments and remittance regulations and other laws that may impact our business. Escheatment and unclaimed property regulations We are subject to unclaimed property laws in the United States and in 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. These laws may also require us to liquidate that property prior to turning it over. We hold property subject to unclaimed property laws, and we have an ongoing program designed to help us comply with these laws. However, there is significant regulatory uncertainty with how states and foreign jurisdictions treat crypto assets under unclaimed property rules. Lending law We originate secured consumer and commercial loans in certain states in the United States. As a result, we are subject to certain federal laws, including: the Truth-in-Lending Act and its implementation of Regulation Z, which require creditors to provide consumers with certain information regarding the terms of their loan and credit transactions; the Equal Credit Opportunity Act and its implementation of Regulation B, which prohibits creditors from discriminating on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of an applicant’s income derives from public assistance, or the fact that the applicant has exercised any right under the federal Consumer Credit Protection Act; the Fair Credit Reporting Act; and the Fair Debt Collection Practices Act, which imposes guidelines and limitations on the conduct of debt collectors in connection with the collection of consumer debts. Our lending activities are also subject to various state lending laws and licensure requirements with respect to lending activities within such state. These state lending laws may be enforced by state attorneys general, state financial regulators, and private litigants, among others. We are also subject to and seek to comply with other state and federal laws and regulations applicable to consumer and commercial lending, including additional requirements relating to loan disclosure, credit discrimination, debt collection, interest rate restrictions, and UDAAPs. These laws and regulations may be enforced by state financial regulators, state attorneys general, the CFPB, and private litigants, among others. Given our novel business model and uncertainty regarding application of some of these laws and regulations, particularly laws prohibiting UDAAPs, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements. 18 Table of Contents Interchange fees Interchange fees associated with four-party payments systems are being reviewed or challenged in various jurisdictions. For example, in the European Union, the Multilateral Interchange Fee Regulation caps interchange fees for credit and debit card payments and provides for business rules to be complied with by any company dealing with card transactions, including us. As a result, the fees that we collect in certain jurisdictions may become the subject of regulatory challenge. Legal requirements for prepaid cards Prepaid card programs are subject to various federal and state laws and regulations, including consumer financial protection regulations such as the CFPB's Regulation E, which imposes requirements on issuers of prepaid cards. The laws and regulations impose compliance obligations and costs on our business, and failure to comply could result in litigation, enforcement actions, and penalties. Card association and payment network rules In addition to the federal and state laws and regulations governing prepaid cards, we, as well as the bank that issues our Coinbase Card, are subject to and required to comply with card association and payment network rules and guidelines which apply to prepaid cards. The card association and payment network rules govern a variety of areas, including how consumers and merchants may use their cards and data security, and may be changed periodically. 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. 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. As the issuer of the Coinbase Card, we are required to comply with the appropriate National Automated Clearing House Association, or NACHA, bylaws, operating rules, and agreements, as well as card network rules and guidelines. Additional new products and services that we offer may also impose additional obligations on us to comply with NACHA and card network obligations related to preventing fraud, money laundering, and IT security breaches. Intellectual Property The protection of our technology and intellectual property is an important aspect of our business. We rely upon a variety of protections, including combination of patents, trademarks, trade secrets, copyrights, confidentiality procedures, and contractual commitments. We co-founded the Crypto Open Patent Alliance, and pledged to only use our crypto technology patents defensively. We may also in the future agree to license our patents to third parties as part of various patent pools and open patent projects. Corporate Information We were initially incorporated in May 2012 as Coinbase, Inc., a Delaware corporation. In January 2014, Coinbase Global, Inc. was incorporated as a Delaware corporation to act as the holding company of Coinbase, Inc. and our other subsidiaries. In April 2014, we completed a corporate reorganization whereby Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. Coinbase Global, Inc.’s principal assets are the equity interests of Coinbase, Inc. In addition to Coinbase, Inc., Coinbase Global, Inc. is the parent company of a number of other operating subsidiaries. Coinbase, the Coinbase logo, and other registered or common law trade names, trademarks, or service marks of Coinbase included in this Annual Report on Form 10-K are the property of Coinbase. Other trademarks, service marks, or trade names included in this Annual Report on Form 10-K are the property of their respective owners. 19 Table of Contents 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. Available Information We file our annual, periodic and current reports, and other required information, electronically with the SEC and this information is available at www.sec.gov. We also make available on our website at www.coinbase.com, free of charge, copies of these reports and other information as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We use our website, blog, press releases, public conference calls, public webcasts, our Twitter feed (@coinbase), Facebook page, LinkedIn page, YouTube channel, and Brian Armstrong’s Twitter 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. 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 contents of the websites referred to above are not incorporated into this filing. 20 Table of Contents