How Does Cash Settlement Differ from Physical Settlement in Futures Contracts?

Cash settlement means that upon expiration, the difference between the contract price and the final settlement price is paid in cash, usually fiat or cryptocurrency, without the exchange of the actual underlying asset. Physical settlement requires the seller to deliver the underlying asset to the buyer at the contract price.

Most crypto futures and all perpetual swaps are cash-settled, simplifying the process and avoiding the logistical complexity of asset transfer.