"Web3 Industry IPOs: Paving a New Silk Road for Fundraising – Tiger Research"

# Web3 Companies Embrace IPOs as Path to Legitimacy and Stability Web3 enterprises are increasingly turning to Initial Public Offerings (IPOs) to signal regulatory compliance, secure institutional trust, and cement their position in mainstream financial markets. This move addresses the inherent limitations of token-based fundraising, such as extreme volatility, regulatory uncertainty, and liquidity issues. The industry now acknowledges the need for a more reliable funding model. Forecasts suggest a surge in IPO activities among centralized exchanges like Bithumb and Kraken, stablecoin issuers such as Circle and Paxos, and Web3 solution providers like Chainalysis and Nansen. These companies aim to enhance institutional investor access and strengthen their global market positions through IPOs. --- # From Tokens to Stocks: The Web3 Industry's Shift to IPOs The Web3 industry has gained attention with Circle, the issuer of USDC, filing for an IPO with the U.S. Securities and Exchange Commission (SEC). This has sparked significant interest in IPOs within the Web3 realm. Historically, Web3 firms utilized ICOs and IDOs for direct retail investor engagement and SAFTs for institutional investors. Though these methods fueled early growth, they also brought volatility and regulatory challenges, leading institutions to seek more stable exits. IPOs offer a compelling alternative, providing long-term funding, reducing legal uncertainties, and granting access to a diverse pool of institutional capital. Standardizing corporate valuation metrics through IPOs builds investor confidence. This report delves into the reasons behind Web3 firms transitioning from token models to IPOs, the impact on the industry, and future prospects. --- # Why Web3 Companies Are Opting for IPOs ## Regulatory Compliance as a Strategic Asset For Web3 firms, IPOs act as a "seal of regulatory approval," akin to quality certifications in other industries. This transparency and trustworthiness prove crucial in sectors like stablecoins and custody services. Circle’s ongoing IPO efforts highlight its strategic importance, despite past setbacks with a SPAC merger. An IPO would formalize Circle’s credibility through the SEC's disclosure framework, enhancing market trust and expanding regulatory market access. Coinbase’s IPO story underscores the value of regulatory compliance, facilitating partnerships with BlackRock and government agencies, showcasing how IPOs boost institutional investor trust. --- ## Challenges of Token-Based Fundraising While token-based fundraising spurred the Web3 industry’s early growth, it introduced post-launch complexities. Centralized exchanges' opaque requirements and liquidity maintenance challenges contrast with the standardized frameworks of IPOs. Price volatility remains a significant issue, with unlock events often causing notable price drops. This instability deters institutional investors from supporting token-based models. The downturn in cryptocurrency venture capital (VC) investments further highlights the challenges. Firms like ABCDE Capital halting new investments and the disconnect between token models and operating revenues complicate sustainable growth, making IPOs an attractive alternative. --- ## Expanding Investor Access IPOs connect Web3 companies to large-scale institutional capital, often inaccessible through tokens. Traditional financial institutions, pension funds, and mutual funds, which avoid cryptocurrencies, can invest in regulated public companies. Sovereign wealth funds, managing approximately $13 trillion, represent a significant potential capital pool reachable through IPOs. In countries with stringent crypto regulations, IPOs provide a viable investment route. South Korean and Japanese investors can participate in the crypto market indirectly by purchasing shares of companies like Coinbase. This increased accessibility through IPOs promotes broader participation in regulated investment channels. --- ## Diversified and Flexible Fundraising IPOs enable large-scale capital raising, supporting diversified expansion strategies. Companies like Coincheck and Coinbase have utilized IPO proceeds for strategic acquisitions. IPOs also offer flexible capital management, allowing the use of publicly traded shares for mergers and acquisitions, improving liquidity and cost-efficiency. Listed companies can leverage additional capital-market instruments for growth initiatives. --- # Outlook for Web3 IPOs The Web3 industry's IPO activities are set to increase, driven by integration into traditional financial systems and success stories from pioneers like Coinbase. Centralized exchanges, custody providers, stablecoin issuers, and Web3 infrastructure developers are poised to lead this trend. ## Centralized Exchanges and Custody Providers Firms like Bithumb, Bitkub, Kraken, and BitGo are prime IPO candidates, enhancing market credibility and supporting business diversification through regulatory compliance. IPOs can help ensure sustainable revenue streams. --- ## Stablecoin Issuers Following Circle, stablecoin firms like Paxos are evaluating IPOs. In the evolving regulatory landscape, IPOs offer a strategic advantage by enhancing transparency and legal clarity, vital for market confidence. --- ## Web3 Solution Providers Specialized data analytics firms such as Chainalysis and Nansen are expected to pursue IPOs. Serving institutional clients, these firms can bolster market trust and fund technological advancements and international expansion through public listings. --- # Conclusion The rise of IPOs in the Web3 sector indicates deeper integration into institutional capital markets, providing tools for regulatory compliance, investor attraction, and global competitiveness. However, IPOs may not suit all Web3 firms. While they offer regulatory transparency and stable financing, they also require extensive compliance and disclosure. Token models still provide rapid fundraising and ecosystem-building benefits. A hybrid strategy, combining IPOs for institutional trust and token offerings for user engagement, could align with business objectives and maintain competitiveness in the evolving market.