Counterparty risk is the risk that a party to a transaction or financial arrangement fails to meet its contractual or financial obligations.
Stablecoin payment flows can create exposure to issuers, custodians, exchanges, payment processors, liquidity providers, merchants, banks, and other intermediaries. The exposure can involve redemption, conversion, custody, settlement, or delivery of funds. The relevant counterparty and amount at risk can change as the payment moves through different stages.
Counterparty risk concerns the performance of another party. Settlement risk focuses specifically on whether the exchange or transfer reaches completion as expected.
Mapping counterparties helps identify where a supposedly rapid digital payment still depends on the solvency, liquidity, or operational performance of intermediaries.
A merchant expecting a processor to convert stablecoins and send fiat proceeds is exposed to that processor until the settlement funds are received.