Web3 Structured Investment: A New Emerging Field of Flexibility and Risk

With the development of the Web3 market, structured investment products are increasingly favored by high-net-worth investors. This "old play" derived from traditional finance has gained new vitality in the Web3 domain, achieving greater flexibility and portfolio efficiency through smart contracts and Token mechanisms.

Main Types of Structured Investment in Web3

Fixed Income Product

These products package the future income rights of a project and sell them in the form of fixed annualized returns. Typical examples include wealth management and yield certificate products for stablecoins launched by mainstream trading platforms, which usually offer an annualized return rate of 5%-15%, with a lock-up period of 30 or 90 days. Some DeFi platforms, such as Pendle Finance, have also introduced product structures that separate income rights from principal rights.

convertible bonds/income certificate products

This product combines fixed income and token conversion rights, providing investors with dual opportunities for stable returns and potential high yields. Investors typically obtain the right to purchase project tokens in the future through agreements such as SAFT or token warrants, while enjoying fixed income during the waiting period.

Risk Layered Fund

These products categorize asset packages into different risk levels, typically divided into two layers: Junior and Senior. The Junior layer bears the primary risk but offers higher returns, while the Senior layer enjoys priority in profit distribution and is also afforded preferential protection in case of losses. This structure caters to the needs of investors with different risk appetites.

platform-type structured products

Recently, some exchanges, wallets, and third-party investment platforms have begun to offer more productized structured investment options. These products lower the participation threshold for users through automated strategies or yield combination designs, allowing more ordinary investors to access complex structured investments.

Legal and Compliance Challenges in Participating in Structured Investments

Although structured products seem to lower the participation threshold, they actually impose higher requirements on investors, especially in terms of compliance:

1. Investor Qualification: Many structured products are only open to qualified or professional investors, and ordinary retail investors may not be able to participate legally.

2. Compliance of Fund Flow: The inflow and outflow of funds need to consider legal and regulatory risks, especially when it involves cross-border transactions.

3. Product Complexity: Investors need to fully understand the product structure and potential risks, and cannot make decisions based solely on surface yields.

4. Platform Qualifications: Investors should carefully choose platforms with legitimate qualifications for investment to ensure legal protection.

How to Comply with Structured Investment Participation

1. Establish a clear investment identity structure, such as offshore SPV, Hong Kong family office, or Singapore exempt fund, to better manage compliance risks.

2. Ensure the legality of fund flows, including the deposit and withdrawal stages, and try to complete currency exchange and settlement through licensed institutions.

3. Carefully review the platform's qualifications, including its financial product sales qualifications, asset disclosure status, and dispute resolution mechanisms.

4. Deeply understand the product structure and risk mechanisms, and do not be misled by the superficial high returns.

Structured investment brings new opportunities to the Web3 sector, but it also comes with complex risks and compliance requirements. Investors need to be well-prepared before participating, including establishing appropriate investment structures, understanding relevant regulations, and choosing reliable investment platforms. Only with a full understanding and the ability to manage risks can structured investment become an effective tool for high-net-worth investors to engage in Web3.