What Coinbase does with their corporate cash

Update ( 8/26/21 ):

Coinbase CEO Brian Armstrong told the world their balance sheet is changing.Coinbase will now put $500 million of cash and cash equivalents in a diversified crypto portfolio.

10% of quarterly net profit will go to the same portfolio, see Brian’s tweet here, and read the release on their blog.

We will continue to track what they do with their cash to see how this plays out. (edited)

Coinbase is synonymous with Crypto, and they are “The trusted venue for crypto trading and custody”. Today we are going to review the financials and learn what they do with their cash and crypto - how much do they have, which cryptos they hold, and where they keep them!

We were pleasantly surprised to learn that Coinbase is very conservative with their “Corporate Cash”, and that they primarily hold crypto for operating purposes and their “investment” in crypto is quite small compared to their cash position.

Coinbase balance-sheet cash breakdown

From the data above you can see Coinbase keeps 80% of their corporate cash super safe & liquid. They use a mix of bank accounts (both checking and savings), along with money market funds. For their USDC, the underlying U.S. dollars are held by the issuer (Coinbase) at federally insured U.S. depository institutions and in approved investments on behalf of, and for the benefit of, holders of USDC (per their latest 10-Q filing).

Unsurprisingly, their largest individual crypto holdings are the crypto’s that have the highest transaction volumes on their platform (BTC, USDC & ETH). It’s difficult to pinpoint how much of these are for “investment purposes” versus their trading operations. These crypto assets are self custodied and are also held at various crypto transaction venues to facilitate their core business.

Their ~$250M of BTC is just about 20% of the BTC that Tesla holds! We will refrain from commenting on the MicroStrategy situation in this issue, but you can read our detailed view in our blog post here.

Those of you who have been thinking about parking a portion of your corporate cash in Crypto Assets should take heed of the conservative position that Coinbase has on the issue. Even, the premier crypto currency business in the world, holds just a small fraction of their balance-sheet assets in Bitcoin, Ethereum & other crypto currencies!