What Is the Difference between Physical and Cash Settlement in Futures, and How Does Stablecoin Usage Relate?
Physical settlement involves the actual delivery of the underlying asset upon contract expiration. Cash settlement involves the difference between the contract price and the market price at expiration being exchanged in cash.
Stablecoins are almost exclusively used for cash-settled cryptocurrency futures, where the stablecoin acts as the unit of account and the medium of exchange for the cash difference. This avoids the logistical complexities of physical crypto delivery.
