How Does the Avoidance of Custody Risk Impact Institutional Adoption of Crypto Derivatives?

The avoidance of custody risk in cash-settled derivatives significantly boosts institutional adoption. Institutions often face strict regulatory requirements regarding the secure storage of digital assets.

By only exchanging cash (or stablecoins) based on a price index, they can gain exposure and hedge their risk without the complex, costly, and regulated requirement of directly managing the underlying cryptocurrency's private keys and cold storage solutions.