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What Is ‘Herstatt Risk’ and How Does It Apply to Cross-Currency Crypto Derivatives?

Herstatt Risk is the risk of paying one currency but not receiving the other; it applies to cross-crypto swaps during non-simultaneous settlement.
Greeks.Live14.11.25

What Is ‘Herstatt Risk’ and How Does It Apply to Cross-Currency Crypto Derivatives?

Herstatt Risk is a form of settlement risk specific to foreign exchange, where one party pays the currency it owes, but the counterparty defaults before delivering the other currency. In cross-currency crypto derivatives (e.g.

BTC/ETH swap), this risk applies if the transfer of one crypto asset is finalized before the other, creating a time lag. Atomic swaps are designed to eliminate this time-zone-based risk.

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