Why Coinbase's Balance Sheet Has Massively Inflated

Coinbase recently filed its interim financial report with quarterly net loss of over $1bn, net cash drain of £4.6bn in 6 months, fair value losses of over 600k.Coinbase has taken all customer assets on to its own balance sheet.Coinbase would have to take that fair value loss directly to its own P&L, rather than dumping it on its customers by haircutting their assets.Coinbase (COIN) recently filed its interim financial report. It makes pretty grim reading. A quarterly net loss of over $1bn, net cash drain of £4.6bn in 6 months, fair value losses of over 600k ... To be sure, Coinbase is not on its knees yet. It still has $12bn of its own and customers' cash (both are on its balance sheet), and a whopping asset base. In fact its assets have increased - a lot. As have its liabilities. Coinbase's balance sheet is five times bigger than it was in December 2021.Here's Coinbase's balance sheet, as reported in its 10-Q filing. I've outlined the relevant items in red: There's a new asset called "customer crypto assets" worth some $88.45 bn, matched by a new liability called "crypto asset liabilities". This asset and its associated liability are by far the biggest items on Coinbase's balance sheet. Footnotes to the balance sheet describe these new items as "safeguarding assets" and "safeguarding liabilities".A note to the financial statements explains that as of June 2022, Coinbase has taken all customer assets on to its own balance sh...