Non-Deliverable Forwards

Definition ∞ Non-deliverable forwards are financial derivative contracts settled in cash based on the difference between a contract rate and a spot rate. In the context of digital assets, these are agreements to exchange a cryptocurrency at a future date at a predetermined rate, but without the actual transfer of the underlying digital asset. Instead, only the net difference between the contracted price and the prevailing market price at settlement is exchanged in fiat currency. This allows participants to hedge or speculate on cryptocurrency price movements without holding the actual digital assets.
Context ∞ The state of non-deliverable forwards (NDFs) for cryptocurrencies is growing, particularly among institutional investors seeking synthetic exposure without direct asset custody. Key discussions involve the regulatory classification of these instruments and the liquidity of the underlying spot markets used for settlement. Future developments include expanding the range of cryptocurrencies available for NDFs and clearer regulatory guidelines that could further institutional adoption and market depth for these derivatives.