# Web3 Firms Turn to IPOs for Strategic Market Entry

Web3 companies are increasingly utilizing Initial Public Offerings (IPOs) as a strategic method to demonstrate regulatory compliance, gain the trust of institutional investors and regulatory authorities, and enter mainstream markets. The token-based fundraising models, while integral to the early growth of these firms, have exhibited structural limitations including extreme price volatility, regulatory uncertainties, and liquidity management issues. Consequently, there is a growing need to transition towards the more stable and long-term approach that IPOs offer.

Future projections suggest an increase in IPO activities among centralized exchanges (such as Bithumb and Kraken), stablecoin issuers (like Circle and Paxos), and Web3 solution providers (such as Chainalysis and Nansen). Through IPOs, these entities are anticipated to enhance their access to institutional investors and solidify their global competitiveness.

# From Tokens to Stocks: The Rising Trend of IPOs in the Web3 Industry

The recent submission of an IPO registration statement by Circle, the issuer of stablecoin USDC, to the U.S. Securities and Exchange Commission (SEC) has heightened interest in IPOs within the Web3 sector. Traditionally, Web3 companies have preferred token-based fundraising methods, such as Initial Coin Offerings (ICOs) and Initial Dex Offerings (IDOs), targeting individual investors. Alternatively, they have sold future token rights to institutional investors through Simple Agreements for Future Tokens (SAFT). These methods accelerated early growth but posed significant volatility and regulatory risks, causing concern among institutional investors and complicating their capital recovery processes.

In this context, IPOs have emerged as a new option. IPOs provide a long-term, stable fundraising base, reduce legal uncertainties through proactive regulatory compliance, broaden access to a diverse pool of investors, and establish standardized corporate valuation frameworks. This report analyzes the key factors driving Web3 companies’ transition from token-based models to IPOs, as well as the potential impacts and future prospects of this shift on the industry ecosystem.

# Reasons Behind Web3 Firms Opting for IPOs

## Strategic Assetization of Regulatory Compliance

For Web3 companies, an IPO acts as a “regulatory compliance certification mark.” Similar to how food companies gain consumer trust through quality certification marks, IPOs offer Web3 firms an opportunity to clearly demonstrate their efforts in regulatory compliance to the market. This strategy is particularly effective in fields where trust is a critical competitive advantage, such as stablecoins and custody services.

Circle’s ongoing pursuit of an IPO underscores its strategic importance. Although Circle attempted to list via a SPAC in 2021 but was unsuccessful, it plans to pursue an IPO again by early 2025. Despite obtaining the New York BitLicense and regularly publishing reserve reports since 2018 to build the trustworthiness of its stablecoin, Circle requires an official market validation of its trustworthiness. An IPO provides Circle an opportunity to formalize and enhance its reliability through the SEC’s standardized disclosure system, potentially allowing Circle to collaborate with global financial institutions and secure a wider entry into regulated markets.

Coinbase serves as another example illustrating the strategic value of regulatory compliance through IPOs. Prior to its IPO, Coinbase was already meticulous about regulatory compliance. Post-IPO, it rapidly expanded through strategic partnerships with BlackRock, offering ETF custody services, and collaborating with over 150 government agencies. It is presumed that the regulatory compliance verified through the IPO played a central role in building institutional investors’ trust and becoming a key competitive strength for Coinbase.

## The Dilemma of Token-Based Fundraising

Token-based fundraising undeniably played a pivotal role in the initial growth phase of the Web3 industry, serving as a swift and efficient capital-raising mechanism. However, complexities and uncertainties distinct from IPOs arise post-token issuance. To broaden investor accessibility, firms almost inevitably depend on centralized exchanges (CEXs), introducing significant uncertainties due to the opaque and subjective listing criteria of these exchanges. Additionally, sustaining post-listing liquidity imposes operational burdens, necessitating direct liquidity provision or separate market-making arrangements. These challenges starkly contrast with the standardized procedures and clear regulations underpinning traditional IPO processes.

Price volatility is another major issue. Large unlock events, in particular, induce severe price fluctuations. Keyrock, a market maker in the cryptocurrency market, asserts that 90% of unlock events, regardless of type and scale, exert downward price pressure, with team unlock events specifically causing average price drops of 25%. Such price crashes complicate capital recovery for investors, reinforcing negative perceptions among institutional investors.

This trend is leading to substantial changes in the cryptocurrency venture capital market. According to Decentralised.co, global cryptocurrency venture capital investment volumes have plummeted by over 60% between 2022 and 2024. Furthermore, Singapore’s ABCDE Capital recently halted new project investments and fund formations, visibly manifesting this shift.

There is also a disconnect between token-utilized business models and company operations. Firms like Aethir and Jupiter generate substantial revenue within the Web3 industry, yet these operational successes are not easily reflected in token valuations, often blurring business focus. For companies like Fireblocks and Chainalysis, centralized service provision forms the core of their business models, making token issuance non-essential and lacking clear justification. Even if they issue tokens, designing and proving their utility poses significant challenges. It could diffuse business focus and introduce additional regulatory and financial complexities. Accordingly, IPOs appear to be an attractive alternative for Web3 firms.

## Enhanced Investor Accessibility

The primary advantage of an IPO for Web3 firms is access to the vast pool of institutional capital that token-based fundraising cannot tap into. Traditional financial institutions, pension funds, and mutual funds are barred by internal compliance policies from directly investing in cryptocurrencies but can invest in shares of companies listed on regulated securities markets. The approximately $13 trillion in assets managed by global sovereign wealth funds exemplifies the potential capital pool accessible via IPOs for Web3 firms.

In nations with stringent cryptocurrency regulations like South Korea and Japan, IPOs provide effective indirect investment pathways. South Korean institutional investors cannot directly invest in Bitcoin ETFs but can participate in the cryptocurrency market indirectly through listed companies like Coinbase or MicroStrategy. Similarly, investors in Japan can bypass high crypto transaction taxes by investing in shares of Metaplanet, gaining efficient indirect exposure to cryptocurrency investments. By enhancing accessibility through IPOs, diverse investors can participate within a legal and stable regulatory framework.

## Role as a Flexible Fundraising Tool

IPOs serve as a potent means for companies to secure large-scale capital. Post-IPO, firms like Coincheck and Coinbase successfully raised funds and actively diversified their businesses. Leveraging the capital secured through its Nasdaq listing, Coincheck acquired Next Finance Tech, while Coinbase expanded its global footprint by acquiring FairX (a derivatives exchange), One River Digital (asset management), and BUX Europe (EU market entry). Though the specific contributions of IPO-raised capital in these acquisitions are not explicitly detailed, it is presumed to have provided significant support.

Moreover, IPOs offer the flexibility to utilize publicly traded shares as strategic assets. Companies can pursue strategic expansions like mergers and acquisitions (M&A) more effectively through stock swaps, avoiding reliance on cash or volatile cryptocurrencies. For instance, a listed company can use its shares instead of cash during an M&A, enabling efficient capital utilization and strategic partnership formation. After IPO, firms can continuously leverage various capital market instruments like new share issuance, convertible bonds, and rights offerings to pursue flexible and effective fundraising in line with their growth strategies.

# Future Prospects of the IPO Market in the Web3 Industry

IPO activities within the Web3 industry are expected to become increasingly vigorous. This outlook is driven by the accelerated incorporation of the Web3 industry into the mainstream, alongside the growing instances of firms like Coinbase successfully raising massive capital through IPOs and expanding globally. The IPO trend is anticipated to spread particularly among centralized exchanges, custody service providers, stablecoin issuers, and Web3 solution companies.

## Centralized Exchanges and Custody Service Providers

Centralized exchanges such as Bithumb, Bitkub, and Kraken, along with custody providers like BitGo, are strong candidates for IPOs. They prioritize rigorous regulatory compliance and asset protection for customers as their key competitive strengths. IPOs can enhance their credibility within regulated markets and reinforce their competitive positions. Given their revenue structures’ significant dependence on the cryptocurrency market conditions, there is also a need to establish more stable revenue bases through business diversification enabled by capital raised from IPOs.

## Stablecoin Issuers

Stablecoin issuers emphasizing regulatory compliance, like Paxos, are also likely to actively consider IPOs. Within the stablecoin market, transparent reserve management and legal clarity are crucial competitive factors. IPOs can significantly bolster market trust by clearly demonstrating the issuers’ regulatory compliance levels. As global regulatory environments rapidly solidify, such as through Europe’s Markets in Crypto Assets Regulation (MiCA) and the U.S.’s Clarity for Payment Stablecoins Act, securing trust through IPOs would offer these firms strategic advantages.

## Web3 Solution Companies

Data analytics solution providers like Chainalysis and Nansen are also strong IPO candidates. These companies offer specialized services primarily to government and institutional clients. Through IPOs, they can bolster market trust and enhance global leadership. Additionally, the capital secured from IPOs can be invested in technological advancements, global expansion, and talent acquisition, laying a solid foundation for sustainable growth.

# Conclusion

The rising trend of IPOs within the Web3 industry signifies an important shift towards integration with mainstream capital markets. Beyond merely raising capital, Web3 firms are creating multifaceted value through IPOs, including formalizing regulatory compliance, attracting institutional investors, and strengthening global competitiveness. At a time when venture capital investments in cryptocurrencies are plummeting, IPOs emerge as a strategic alternative for Web3 firms to secure stable and flexible fundraising pathways.

However, IPOs may not be suitable for every Web3 company, and those pursuing IPOs are unlikely to completely abandon token models. While IPOs offer extensive capital access, credibility, and global market entry, they also entail substantial costs and preparatory processes, including stringent regulatory compliance, internal compliance frameworks, and disclosure obligations. Conversely, token models serve as rapid, efficient initial fundraising tools with unique value in fostering community-centric ecosystems.

A complementary utilization of both models is practical. For example, exchange firms can secure institutional trust and drive global expansion through IPOs, while simultaneously boosting user engagement and loyalty within their platforms via native tokens. Web3 companies must identify the optimal combination of IPOs and token issuance tailored to their business models, growth stages, and target markets to build long-term competitiveness.

*This article is an expert offering by Tiger Research, a partner of Block Media, titled “The IPO of the Web3 Industry: A New Silk Road for Fundraising.” The full report is available at Tiger Research’s official site.*