Original Title: "Web3 IPO: The New Silk Road of Financing"

Original Source: Tiger Research Reports

Key Points Summary

· Web3 companies see IPO as a strategic tool to build a formal regulatory framework, gaining trust from institutional investors and regulatory bodies, and deeply integrating with traditional financial markets.

· The token financing model has exposed structural flaws such as price volatility, regulatory ambiguity, and liquidity management pressures, highlighting the need to transition to IPO.

· It is expected that centralized exchanges (Bithumb, Kraken), stablecoin issuers (Circle, Paxos), and Web3 solution providers (Chainalysis, Nansen) will lead the IPO wave, expanding institutional funding channels through listing and strengthening global competitiveness.

1. From Tokens to Stocks: The IPO Transition Trend in the Web3 Industry

Stablecoin USDC issuer Circle has submitted an Initial Public Offering (IPO) application to the U.S. Securities and Exchange Commission (SEC), sparking widespread attention in the Web3 industry on the IPO path.

Web3 companies have historically favored the token financing model: reaching retail investors through ICOs (Initial Coin Offerings) and IDOs (Initial DEX Offerings), and selling future token rights to institutional investors through SAFTs (Simple Agreements for Future Tokens). These methods have fueled the early explosive growth of the Web3 industry, but price volatility and regulatory uncertainty continue to plague institutional investors, severely hindering investment returns in the token model.

Against this backdrop, IPO has become an alternative choice. Through IPOs, Web3 companies can access more stable, long-term funding, proactively ensure compliance to reduce legal uncertainty, establish a standardized corporate valuation framework, and reach a broader investor base. This report delves into the core reasons for Web3 companies transitioning from the token model to IPOs, assessing the impact of this transformation on the industry ecosystem and its future prospects.

2. Deep Logic of Web3 Companies Choosing IPO

2.1 Regulatory Trust as a Strategic Asset

Web3 Enterprises Transform IPO into a "Regulatory Compliance Certification Badge". Just as food companies win consumer trust through quality certifications, IPOs allow Web3 enterprises to clearly display their compliance efforts to the market, a strategy particularly effective in trust-driven business areas such as stablecoin issuance and custody services.

Circle continues to drive the IPO process to affirm its strategic value. The company, which unsuccessfully attempted a SPAC listing in 2021, now plans to make another push for an IPO in early 2025. Since 2018, Circle has built stablecoin credibility by obtaining the New York BitLicense and regularly issuing reserve reports, but lacking formal market validation has only garnered limited trust. The IPO enables Circle to formally establish credibility through the SEC's standardized disclosure framework, allowing it to obtain a "market access passport" compared to Tether, facilitating collaboration with global financial institutions and entry into a broader traditional market.

Coinbase validates the compliance strategic value through its IPO. The exchange maintained strict legal compliance pre-IPO and rapidly expanded its footprint post-listing: establishing a strategic partnership with BlackRock, offering ETF custody services, and connecting with over 150 government agencies. This development trajectory shows that institutional investors formally recognize Coinbase's compliance efforts through the IPO, with this recognition transforming into a key competitive advantage in building trust.

2.2 Structural Dilemma of Token Financing

Token financing has played a critical role in the early development of the Web3 industry, providing a fast and efficient funding channel. However, companies face unique complexities after token issuance: they must rely on centralized exchanges (CEXs) to expand investor coverage, and these exchanges introduce significant uncertainty through opaque, subjective listing standards; post-listing, they need to provide direct liquidity or ensure market-making partnerships. In comparison, the traditional IPO process follows a standardized procedure and clear regulatory framework.

Token unlock events often accompany significant price drops, Source: Keyrock

Price volatility poses another core issue. Large-scale token unlockings trigger severe market price fluctuations, with Keyrock data showing that 90% of unlock events lead to price declines, and team token unlocks on average trigger a 25% price crash. This price collapse makes it challenging for institutional investors to achieve their investment returns, reinforcing their negative perception of the token model.

Crypto VC Funding Cliff Dive: 2021-2025, Source: Decentralised.co

This trend is substantially reshaping the crypto VC market landscape. Data from Decentralised.co shows that global crypto venture funding will experience a decline of over 60% from 2022 to 2024. Recently, Singapore's ABCDE Capital has paused new project investments and fund-raising, indicating a visible shift in the market.

Companies struggle to effectively align the tokenomics with operational substance. While Aethir and Jupiter have achieved significant revenue in the Web3 industry, these business accomplishments have rarely translated into token price correlation, often blurring the business focus. Companies like Fireblocks and Chainalysis primarily offer centralized services rather than token products, resulting in a lack of organic fit and clear necessity for token issuance. Designing and validating token utility has become a significant challenge, not only diluting existing business focus but also introducing additional regulatory and financial complexities, prompting Web3 enterprises to turn to IPOs for breakthroughs.

2.3 Expand Investor Coverage Dimension

Global Sovereign Wealth Fund Management Assets Exceed $13 Trillion, Source: globalswf.com

IPO Provides Web3 Companies with the Greatest Advantage: Accessing institutional capital from large-scale entities that token financing struggles to reach. Due to internal compliance policies, traditional financial institutions, pension funds, and mutual funds cannot directly invest in cryptocurrencies but can invest in stocks of publicly listed companies in regulated securities markets. Global sovereign wealth funds manage approximately $13 trillion in assets, revealing the potential pool of capital that Web3 companies can access through IPOs.

Even in regions with strict crypto regulations like South Korea and Japan, IPOs can create effective indirect investment channels. While South Korean institutional investors cannot directly invest in Bitcoin ETFs, they can participate indirectly in the crypto market through listed companies like Coinbase and MicroStrategy; Japanese investors can avoid high crypto trading taxes and gain efficient exposure to crypto assets through Metaplanet stocks. This expanded accessibility will promote diversified investor participation, offering legitimate and stable investment tools within the regulatory framework.

2.4 Strategic Value of IPO as a Flexible Financing Tool

An IPO enables companies to effectively raise large-scale capital. Coincheck and Coinbase successfully raised funds through IPO and implemented aggressive business diversification: Coincheck used Nasdaq listing funds to acquire Next Finance Tech; Coinbase enhanced its global competitiveness through the acquisitions of FairX (derivatives exchange), One River Digital (asset management company), and BUX Europe (EU market entry). Although the specific contribution of IPO funds to these acquisitions was not disclosed, it likely provided a significant foundation for their expansion strategies.

An IPO also empowers companies to use stocks as a means of payment in mergers and acquisitions. Publicly traded companies can use stock consideration to carry out M&A transactions, reducing reliance on cash or volatile crypto assets. This operation achieves efficient capital management and strategic partnership development. After going public, companies can continuously utilize diversified capital market tools such as new stock issuance, convertible bonds, rights issues, etc., to achieve ongoing flexible financing aligned with their growth strategy.

3. Future Outlook of the Web3 Industry IPO Market

Over the next few years, IPO activities in the Web3 space will significantly intensify. This trend reflects both the acceleration of the Web3 institutionalization process and benefits from successful cases like Coinbase, which raised significant funds through public offerings and achieved global expansion. Centralized exchanges, custody service providers, stablecoin issuers, and Web3 solution companies will lead this wave of IPOs.

3.1 Centralized Exchanges and Custody Service Providers

Exchanges such as Bithumb, Bitkub, Kraken, along with custody service providers like BitGo, are key IPO candidates. These companies build competitive advantages through regulatory compliance and asset security, needing to enhance institutional credibility and market strength through an IPO. Their revenue is highly correlated with the crypto market cycle, and IPO funds will help them expand into new businesses to achieve stable income.

3.2 Stablecoin Issuers

Following Circle, compliant stablecoin issuers like Paxos may pursue an IPO. The stablecoin market emphasizes reserve transparency and clear regulation, where an IPO can showcase a compliance framework and establish market trust. With global regulations such as EU's MiCA, the U.S. stablecoin bill, and ongoing regulatory evolution worldwide, an IPO will provide issuers with a significant strategic advantage.

3.3 Web3 Solution Providers

Web3 analytics companies such as Chainalysis and Nansen are also key IPO candidates. These companies provide professional services to governments and institutional clients, and they need to enhance market credibility and solidify their global leadership through an IPO. The funds raised through the IPO will be used for technology upgrades, international expansion, and talent acquisition to build a sustainable development foundation.

4. Conclusion

The rise of Web3 industry IPOs marks a clear shift towards the mainstream capital markets. Through an IPO, Web3 companies not only raise funds but also achieve regulatory compliance formalization, attract institutional investors, and enhance global competitiveness. Amidst the ongoing decline in cryptocurrency venture capital, IPOs offer a stable and flexible financing alternative.

However, IPOs are not suitable for all Web3 companies. Even companies opting for an IPO are unlikely to completely abandon token financing. While IPOs can provide broader funding channels, stronger credibility, and easier access to global markets, they require significant compliance costs, internal control development, and public disclosure. The token model, on the other hand, supports rapid early-stage financing and the cultivation of an active community ecosystem.

Companies can strategically combine both models: leveraging an IPO to establish institutional trust for global expansion while using tokens to enhance user participation and loyalty. Depending on their business model, development stage, and market strategy, Web3 companies should carefully choose the optimal combination of IPO and token issuance.

Original Article Link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia