Cash settlement concludes a financial transaction by exchanging monetary value instead of delivering the actual underlying asset. This method is common in derivatives markets, including futures and options on cryptocurrencies, where physical delivery of the digital asset might be impractical or undesirable. The final value is determined by the difference between the contract price and the market price at expiration. It simplifies the transaction process by removing the need for asset transfer.
Context
In crypto news, cash settlement is frequently discussed concerning Bitcoin futures ETPs and other regulated financial products that track digital asset prices without requiring direct ownership. Regulatory bodies often prefer cash-settled products for their perceived simplicity and reduced operational complexities. The implementation of cash settlement influences liquidity and trading strategies in the broader digital asset derivatives market.
J.P. Morgan's Kinexys unit is piloting a USD deposit token on a public blockchain to optimize institutional cash settlement and payment workflows, enhancing operational efficiency and liquidity management for enterprise clients.
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