Definition ∞ Cross-currency risk signifies the potential for financial loss resulting from unfavorable movements in exchange rates between two distinct currencies. This risk emerges when an individual or entity holds assets or liabilities denominated in a foreign currency. Fluctuations in value can impact the true worth of investments or the expense of obligations. It is a standard consideration in international financial dealings.
Context ∞ In the digital asset sector, cross-currency risk is a pertinent factor for stablecoins and other crypto assets linked to fiat currencies. Holders of these assets may face exposure when converting between different national currencies or their digital representations. The volatility of traditional foreign exchange markets can influence the stability and utility of such digital instruments. Managing this risk is important for participants in global digital asset markets.
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