v3.22.4
DERIVATIVES (Tables)
 12 Months Ended
Dec. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Description of derivatives and related hedge accounting designation
The following outlines the Company’s derivatives and the related hedge accounting designation, as applicable.
Type of DerivativeDescription of DerivativeLocation of Host Contract and Derivative on Balance Sheets
Crypto asset borrowings(1)
The Company borrowed crypto assets that resulted in the obligation to deliver a fixed amount of crypto assets in the future.
Crypto asset borrowings
Accounts and loans receivable denominated in crypto assetsAccounts receivable denominated in crypto assets: The Company provided services for which, under the contract, the customer pays in crypto assets. The amount of crypto assets are fixed at the time of invoicing.
Crypto asset loans receivable: The Company lends crypto assets to institutions. The amount of crypto assets are fixed at the time of loan origination.
In both of the above cases, the right to receive fixed amounts of crypto assets consists of a receivable host contract and an embedded forward contract to purchase crypto assets.		Accounts and loans receivable, net of allowance
Other payables denominated in crypto assetsThe Company entered into arrangements that result in the obligation to deliver a fixed amount of crypto assets in the future.Accrued expenses and other current liabilities
Crypto asset futures(1)
The Company entered into short positions on futures contracts to minimize the exposure on the change in the fair value price of crypto assets held.
Accounts and loans receivable, net of allowance
Crypto assets pledged as collateral
The Company derecognizes the collateral that has been pledged and recognizes a right to receive a fixed amount of crypto assets pledged as collateral if the lender has the right to use the collateral. The Company has pledged Bitcoin that serves exclusively as collateral for fiat loans.
Prepaid expenses and other current assets
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(1)     For risk management purposes, the Company applies hedge accounting using these derivative instruments in qualifying fair value hedges to primarily hedge the fair value exposure of crypto asset prices.
Schedule of the notional amount of derivative contracts outstanding
The following table summarizes the notional amounts of derivative instruments outstanding, measured in U.S. dollar equivalents (in thousands):
December 31,
20222021
Designated as hedging instrument
Crypto asset borrowings with embedded derivatives
$80,999 $669,445 
Crypto asset futures(1)
136,230 — 
Not designated as hedging instrument
Crypto asset borrowings with embedded derivatives
70,462 — 
Accounts and loans receivable denominated in crypto assets101,598 17,415 
Other payables denominated in crypto assets4,267 — 
Crypto asset futures(1)
12,462 — 
Crypto assets pledged as collateral13,103 — 
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(1)    Derivative transactions are measured in terms of the notional amount; however, this amount is not recorded on the consolidated balance sheets and is not, when viewed in isolation, a meaningful measure of the risk profile of the derivative instruments. The notional amount is generally not exchanged, but is used only as the underlying basis on which the value of exchange payments or settlement under these contracts are determined.
The following tables summarize information on derivative assets and liabilities that are reflected on the Company’s consolidated balance sheets, by accounting designation (in thousands):
Gross Derivative AssetsGross Derivative Liabilities
December 31, 2022Not Designated as HedgesDesignated as HedgesTotal Derivative AssetsNot Designated as HedgesDesignated as HedgesTotal Derivative Liabilities
Crypto asset borrowings with embedded derivatives(1)
$2,266 $— $2,266 $657 $1,653 $2,310 
Accounts and loans receivable denominated in crypto assets302 — 302 9,146 — 9,146 
Other payables denominated in crypto assets1,270 — 1,270 5,767 — 5,767 
Crypto assets pledged as collateral— — — 2,360 — 2,360 
Total fair value of derivative assets and liabilities$3,838 $— $3,838 $17,930 $1,653 $19,583 

Gross Derivative AssetsGross Derivative Liabilities
December 31, 2021Not Designated as HedgesDesignated as HedgesTotal Derivative AssetsNot Designated as HedgesDesignated as HedgesTotal Derivative Liabilities
Crypto asset borrowings with embedded derivatives(1)
$— $336,396 $336,396 $— $93,616 $93,616 
Accounts receivable denominated in crypto assets9,033 — 9,033 — — — 
Total fair value of derivative assets and liabilities$9,033 $336,396 $345,429 $— $93,616 $93,616 
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(1)    During the years ended December 31, 2022 and 2021, the fees on these borrowings ranged from 0.0% to 9.0% and 0.0% to 10.0%, respectively. During the years ended December 31, 2022 and 2021, the Company incurred $6.7 million and $11.8 million, respectively, of borrowing fees in crypto assets. Borrowing fees are included in other operating expense, net in the consolidated statements of operations.
The following amounts were recorded on the consolidated balance sheets related to certain cumulative fair value hedge basis adjustments that are expected to reverse through the consolidated statements of operations in future periods as an adjustment to other operating expense, net (in thousands):
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
December 31, 2022Carrying Amount of the Hedged ItemsActive Hedging RelationshipsDiscontinued Hedging RelationshipsTotal
Crypto assets held$201,565 $(562)$670 $108 
Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of Hedged Items
December 31, 2021Carrying Amount of the Hedged ItemsActive Hedging RelationshipsDiscontinued Hedging RelationshipsTotal
Crypto assets held$421,685 $(240,771)$— $(240,771)
Schedule of gains (losses) recorded in income
Gains (losses) on derivative instruments recognized in the Company’s consolidated statements of operations were as follows (in thousands):
Year Ended December 31, 2022Year Ended December 31, 2021
DerivativesHedged ItemsIncome Statement ImpactDerivativesHedged ItemsIncome Statement Impact
Designated as fair value hedging instruments
Crypto asset borrowings with embedded derivatives(1)
$359,240 $(359,528)$(288)$87,730 $(70,577)$17,153 
Crypto asset futures(1)
13,571 (12,994)577 — — — 
Not designated as hedging instruments
Crypto asset borrowings with embedded derivatives(1)
11,242 — 11,242 — — — 
Accounts and loans receivable denominated in crypto assets(1)
(24,969)— (24,969)— — — 
Other payables denominated in crypto assets(1)
5,271 — 5,271 — — — 
Crypto asset futures(1)
1,735 — 1,735 — — — 
Foreign currency forward contracts(2)
(59,063)— (59,063)— — — 
Crypto assets pledged as collateral(1)
(2,360)— (2,360)— — — 
Total$304,667 $(372,522)$(67,855)$87,730 $(70,577)$17,153 
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(1)Changes in fair value are recognized in other operating expense, net in the consolidated statements of operations.
(2)Changes in fair value are recognized in other expense (income), net. The forward contracts were closed out during the fourth quarter of 2022, and as of December 31, 2022, the Company does not have any open contracts for foreign exchange forwards.