Coinbase Adopts New Crypto Accounting Standards Early, Boosting Q1 Results

The company recorded an extra $737 million in mostly unrealized gains in the quarter by using mark-to-market rules.

Crypto exchange Coinbase adopted new accounting rules in the first quarter that allowed it to record unrealized gains on the appreciation of its crypto holdings using mark-to-market rules. Previously, companies were required to record impairment losses when the price of their digital assets declined below their purchase prices, but were unable to record gains if they were not realized. 

Coinbase said on its Thursday earnings call that it recorded $737 million in pre-taxed mark-to-market crypto gains in the first quarter, of which $86 million came from gains on digital assets held for operations, and $650 million from investment gains, most of which were unrealized. 

Cryptocurrencies rose significantly from the end of the fourth quarter to the end of the first quarter. The company said it would add back digital gains and losses to its adjusted earnings since they are not considered part of its daily operations. 

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The Financial Accounting Standards Board announced the rules change to fair market valuation for digital assets last December, with all companies required to comply with them starting in 2025. However, companies are allowed to start applying the rules earlier if they wish.

Overall, Coinbase reported a strong quarter in which its total revenue came in at $1.6 billion vs. expectations of $1.36 billion, according to FactSet, and adjusted earnings per share of $4.40, compared to analyst estimates of $1.15.

Prices nonetheless fell 2.8% in after hours trading to $222.35. Shares are up 32% year to date.

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