How Is Counterparty Risk Assessed for a Crypto Derivatives Contract?

Assessing counterparty risk for a crypto derivatives contract involves evaluating the financial health and creditworthiness of the counterparty, especially for uncleared OTC contracts. For cleared contracts, the risk is shifted to the clearing house, and assessment focuses on the clearing house's capital and risk management.

Key factors include the counterparty's capital, collateralization requirements, and regulatory compliance.