Author: Tiger Research

Key Points Summary

• Web3 companies are using IPOs as a strategic tool to build formal regulatory frameworks, gaining trust from institutional investors and regulators, and achieving deeper integration with traditional financial markets.
• Token financing models expose structural flaws such as extreme price volatility, regulatory ambiguity, and liquidity management pressure, highlighting the necessity of transitioning to IPOs.
• 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 capital channels and enhancing global competitiveness through listing.

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

The stablecoin issuer Circle submitted an initial public offering (IPO) application to the U.S. Securities and Exchange Commission (SEC), which has sparked widespread attention in the Web3 industry regarding the IPO path.

Web3 companies have traditionally favored token financing models: directly reaching retail investors through ICOs (Initial Coin Offerings) and IDOs (Initial DEX Offerings), and selling future token rights to institutional investors through SAFTs (Simple Agreement for Future Tokens). These methods once drove the explosive growth of the Web3 industry, but token price volatility and regulatory uncertainty have continuously troubled institutional investors, severely limiting their ability to achieve investment returns.

In this context, IPOs have become an alternative. Web3 companies can obtain more stable and long-term funding through IPOs, reduce legal uncertainties by actively complying, establish standardized enterprise valuation frameworks, and reach a broader investor base. This report thoroughly analyzes the core motivations behind the transition of Web3 companies from token models to IPOs, evaluates the impact and future prospects of this transformation on the industry ecosystem.

2. The Deep Logic Behind Web3 Companies Choosing IPOs

2.1 Regulatory Trust as a Strategic Asset

Web3 companies are building IPOs as a "regulatory compliance certification mark." Just as food companies gain consumer trust through quality certifications, IPOs allow Web3 companies to clearly demonstrate their compliance efforts to the market. This strategy is particularly effective in trust-driven business areas such as stablecoin issuance and custodial services.

Circle's continued push for IPO processes confirms its strategic value. The company attempted a SPAC listing in 2021 but failed, now plans to re-enter the IPO market in early 2025. Since 2018, Circle has built stablecoin credibility by obtaining the New York State BitLicense and regularly releasing reserve reports, but lacking formal market validation only gained limited trust. IPO allows Circle to formally establish credibility through SEC's standardized disclosure framework, compared to Tether obtaining a 'market access passport,' enabling collaboration with global financial institutions and entering a broader traditional market.

Coinbase validated the strategic value of its compliance approach through IPO. The exchange maintained strict legal compliance before its IPO, and after going public, it quickly expanded its operations: establishing a strategic partnership with BlackRock to provide ETF custody services, and establishing connections with over 150 government agencies. This development trajectory shows that institutional investors officially recognized Coinbase's compliance efforts, and this recognition transformed into a key competitive advantage for building trust.

2.2 Structural Challenges of Token Financing

Token financing played a crucial role in the early development of the Web3 industry, providing a fast and efficient financing channel. However, after issuing tokens, companies must deal with unique complexities: they must rely on centralized exchanges (CEXs) to expand investor coverage, while exchanges use opaque and subjective listing standards, creating significant uncertainty; after listing, they need to provide direct liquidity or ensure market-making cooperation. In contrast, traditional IPO processes follow standardized procedures and clear regulatory frameworks.

Token unlock events often result in significant price drops, source: Keyrock

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

Decline in crypto VC financing: 2021-2025, source: Decentralised.co

This trend is substantially changing the landscape of the crypto venture capital market. Decentralised.co data shows that global crypto risk investment amounts fell by over 60% between 2022 and 2024, and Singapore's ABCDE Capital recently suspended new project investments and fund raising, indicating a visible shift in the market.

Companies struggle to effectively link token economic models with operational substance. Aethir and Jupiter achieved considerable revenue in the Web3 industry, but these commercial achievements rarely correlate with token prices, instead often blurring business focus. Fireblocks and Chainalysis primarily provide centralized services rather than token products, making token issuance lack organic alignment and clear necessity. Designing and validating token utility has become a major challenge, not only diverting attention from existing operations but also bringing additional regulatory and financial complexity, prompting Web3 companies to turn to IPOs for breakthroughs.

2.3 Expanding Investor Coverage Dimensions

Global sovereign wealth funds manage over $13 trillion in assets, source: globalswf.com

IPO provides Web3 companies with a major advantage: accessing large institutional capital that token financing cannot reach. Due to internal compliance policies, traditional financial institutions, pension funds, and mutual funds cannot directly invest in cryptocurrencies, but they can invest in stocks of listed companies in regulated securities markets. Global sovereign wealth funds manage approximately $13 trillion in assets, revealing the scale of potential capital pools that Web3 companies can access through IPOs.

Even in strictly regulated crypto regions like South Korea and Japan, IPOs can create effective indirect investment channels. Although South Korean institutional investors cannot directly invest in Bitcoin ETFs, they can indirectly participate in the crypto market through listed companies like Coinbase and MicroStrategy; Japanese investors can bypass high crypto transaction taxes and gain efficient crypto asset investment opportunities through Metaplanet stock. This accessibility expansion will promote diverse investor participation, providing legal and stable investment tools within the regulatory framework.

2.4 Strategic Value as a Flexible Financing Tool

IPO enables companies to effectively secure large-scale capital. Coincheck and Coinbase successfully raised funds through IPOs and implemented aggressive business diversification: Coincheck used Nasdaq listing funds to acquire Next Finance Tech; Coinbase acquired FairX (a derivatives exchange), One River Digital (asset management company), and BUX Europe (EU market entry) to enhance global competitiveness. Although the specific contribution of IPO funds to these acquisitions is not disclosed, it is likely that they provided an important foundation for the expansion strategy.

IPO also gives companies the ability to use shares as a means of payment for acquisitions. Listed companies can implement acquisition transactions through stock consideration, reducing reliance on cash or volatile cryptocurrency assets. This operation achieves efficient capital management and strategic partnership building. After going public, companies can continue to use a variety of capital market tools such as new share issuances, convertible bonds, and rights issues to achieve continuous flexible financing aligned with their growth strategies.

3. Future Outlook for the Web3 IPO Market

In the coming years, IPO activities in the Web3 sector will significantly increase, reflecting the accelerated institutionalization of Web3 and benefiting from successful cases like Coinbase, which obtained substantial funds through public offerings and achieved global expansion. Centralized exchanges, custodial service providers, stablecoin issuers, and Web3 solution companies will lead this IPO wave.

3.1 Centralized Exchanges and Custodial Service Providers

Exchanges such as Bithumb, Bitkub, Kraken, and custodial service providers like BitGo are the main candidates for IPOs. These companies build competitive advantages through compliance construction and asset security assurance, and need to use IPOs to enhance institutional credibility and market strength. Their revenue is highly correlated with the crypto market cycle, and IPO funds will help them expand new businesses to achieve stable income.

3.2 Stablecoin Issuers

After Circle, compliant stablecoin issuers like Paxos may follow with IPOs. The stablecoin market values reserve transparency and regulatory clarity, and IPOs can both demonstrate compliance frameworks and build market trust. With ongoing global regulatory developments such as the EU MiCA and the US stablecoin bill, IPOs will grant issuers significant strategic advantages.

3.3 Web3 Solution Companies

Companies like Chainalysis and Nansen are also key candidates for IPOs. These companies provide professional services to governments and institutional clients, needing to use IPOs to enhance market credibility and consolidate their global leadership position. IPO proceeds will be invested in technological upgrades, international expansion, and talent recruitment, building a sustainable development foundation.

4. Conclusion

The rise of IPOs in the Web3 industry marks a clear shift toward mainstream capital markets. Web3 companies not only obtain funds through IPOs, but also formalize regulatory compliance, attract institutional investors, and enhance global competitiveness. In the context of continued decline in crypto venture capital, IPOs offer a stable and flexible alternative financing solution.

However, IPOs are not suitable for all Web3 companies. Even companies that choose IPOs may not completely abandon token financing. While IPOs can provide broader funding channels, stronger credibility, and easier global market access, they require significant compliance costs, internal control construction, and public disclosure. Token models, on the other hand, support rapid early-stage financing and cultivate an active community ecosystem.

Companies can strategically combine the two models: Exchanges can build institutional trust and achieve global expansion through IPOs, while using tokens to enhance user engagement and loyalty. Web3 companies need to carefully choose the optimal combination of IPOs and token issuance based on their business model, development stage, and market strategy.