Structured Investment: A Flexible Way to Participate in Web3

As the identity restrictions in the secondary market become increasingly stringent, incubational investments face issues such as high thresholds and long cycles. A more flexible and “configurable” investment method is gaining the attention of more and more high-net-worth investors: structured products.

In fact, structured investments are not unique to Web3; they originate from mature practices in traditional financial markets. In traditional markets, investment banks typically bundle a portfolio of assets and then process them in layers: a higher risk layer, such as “equity” or “subordinated debt”, targets investors willing to take on high risks in pursuit of high returns; a lower risk layer, on the other hand, protects the principal through mechanisms such as priority repayments and capital preservation, attracting more conservative allocated funds.

Today, this logic has been introduced into the Web3 field.

The Essence of Structured Investment in Web3

The core of structured products lies in splitting a certain “right to income” and then recombining it into investment portfolios that cater to different risk preferences. In the Web3 market, there are mainly the following types of structured products:

fixed income product

This is the most common type of structured product. The project party or platform bundles part of the future rights to earnings ( such as Staking rewards, DeFi interest rates, protocol fee sharing, etc. ) and sells them in the form of “fixed annualized returns” to attract conservative capital. Typical cases include wealth management products and income certificate products launched by major trading platforms, which usually offer a locking period of 30 days or 90 days, with annualized returns ranging from 5% to 15%.

In addition, some DeFi platforms such as Pendle Finance will tokenize and split DeFi yield rights, forming a structure of “YT(Yield Token)+PT(Principal Token)”. Users can choose to purchase only PT to lock in future yields or choose YT to bet on future interest rate increases.

convertible bonds/earnings certificate products

This type of product is commonly seen in primary investments or project collaborations, adopting a “debt priority + Token opportunistic conversion” model. Investors typically obtain the right to purchase future project Tokens through agreements such as SAFT or Token Warrants, while also enjoying fixed returns. For example, the Web3 project Astar Network used a similar structured financing method in its early financing stage.

Risk Layering Fund

This is the type with the most “financial engineering flavor”. Typically, a basket of assets is packaged and divided into different risk levels, the most common being Junior( subordinate) and Senior( priority) two-layer structure. Element Finance is a typical case, constructing a “fixed income + high-risk game” dual-layer structure by separating the income rights from the principal.

platform-type structured product

Recently, structured investments have started to develop towards a platform-based and product-based direction. Some exchanges, wallets, or third-party investment platforms dominate the “design-packaging-sales” closed loop. For example, Ribbon packages volatility returns into structured financial products through automated strategies combining options; a certain trading platform has launched a product with “principal protection + floating returns”, which links the basic stablecoin investment with high-risk asset returns.

Legal Boundaries and Compliance Challenges

When participating in structured products, investors need to consider the following key issues:

1. Investor identity: Most structured products are only aimed at qualified investors. For example, the Hong Kong SFC stipulates that most virtual asset derivatives can only be offered to professional investors; the U.S. SEC also limits most structured products involving future Token rights, income splitting, and preferential profit sharing to the Reg D scope.

2. Capital flow: The inflow and outflow paths of funds involve multiple compliance risks, especially in cross-border capital flows.

3. Understanding the Product: Structured products are often more complex than they appear on the surface, and investors need to fully understand the underlying mechanisms.

4. Platform Qualifications: Whether the platform is qualified to sell related products is also an important consideration.

How to Comply with Structured Investment Participation?

To reduce compliance risks, high-net-worth investors may consider the following strategies:

1. Establish a clear identity structure, such as offshore SPV, Hong Kong family office structure, or Singapore exempt fund, etc.

2. Ensure that the flow of funds is compliant, use bank accounts that match the identity structure, and complete currency exchange and settlement through licensed institutions.

3. Carefully choose the platform to participate in, paying attention to its financial product sales qualifications, underlying asset disclosures, and dispute resolution mechanisms.

Structured investment provides high-net-worth investors with a “controllable entry point,” but it also requires investors to have strong risk identification capabilities and legal awareness. It does not rely on market cycles and does not demand technical consensus; instead, it finds an appropriate risk/reward balance for investors through mechanism design.