Structured Investments: Emerging Opportunities and Risks in the Web3 Space

As the identity restrictions in the secondary market become increasingly stringent, the traditional incubation-type investment has high thresholds and long cycles, a more flexible and customizable investment method is gradually favored by high net worth investors: structured products.

In fact, structured investments are not a new concept unique to Web3, but a mature practice in the traditional finance sector. In traditional markets, financial institutions often bundle a basket of assets and process them in layers: the high-risk layer is aimed at investors seeking high returns, while the low-risk layer attracts conservative funds through mechanisms such as priority repayment and principal protection.

This concept has now been introduced into the Web3 ecosystem.

Main Types of Structured Investments in Web3

In the current Web3 market, we can observe the following typical structured products:

fixed income products

This is the most common type of structured product. The project party or platform packages part of the future rights to income (such as Staking rewards, DeFi interest rates, protocol fee sharing, etc.) and sells it in the form of fixed annual returns to attract conservative funds.

Most trading platforms offer a "fixed-term + annualized" product structure. Assets are usually locked for 30 or 90 days, with annualized returns ranging from 5% to 15%, mainly targeting mainstream assets such as USDT, ETH, and BTC. Some platforms even label products as "principal-protected" to reduce users' risk perception.

In addition, some DeFi platforms tokenize and split DeFi yield rights, forming a structure of "YT (Yield Token) + PT (Principal Token)". Users can choose to purchase PT to lock in future yields without bearing volatility risk, or choose to stake YT to bet on future interest rate increases.

convertible bonds/income certificate products

This type of product is commonly seen in primary investments or project collaborations, essentially following the strategy of "debt priority + opportunistic Token conversion": initially providing stable returns with fixed income, and later triggering a discounted exchange for project Tokens based on conditions, balancing stability and speculation.

Investors usually obtain the right to purchase future project Tokens by signing agreements such as the SAFT (Simple Agreement for Future Tokens) or Token Warrants. These agreements typically set specific triggering conditions, such as the project's launch, reaching a certain development stage, or a specific point in time.

At the same time, to enhance attractiveness and mitigate downside risks, the agreement will also introduce fixed income clauses, such as paying fixed interest to investors on a regular basis before the Token goes live, which can be in the form of stablecoins or other assets.

Risk Layering Fund

This is the type with the most financial engineering characteristics among Web3 structured products. Generally, a basket of assets is packaged and then divided into different risk levels. The most common structure has two layers: Junior and Senior. The Junior layer bears the main risks but offers higher returns; the Senior layer has priority in profit distribution when the project generates income and has priority in protecting the principal in case of losses.

The core advantage of this structure lies in its ability to meet the needs of different investors through a clear risk-return matching mechanism, while also achieving optimal allocation of funds. However, its weaknesses are also evident: once the market experiences severe fluctuations that lead to significant losses in the main pool's assets, the Junior Tranche, as the first line of risk buffer, may quickly shrink or even be wiped out. Although the Senior Tranche has priority, if the entire pool's repayment capacity collapses, that priority becomes difficult to realize.

platform-type structured product

In recent years, structured investments have gradually shifted from protocol-level peer-to-peer asset packaging to a platform-based, product-oriented approach. Driven by exchanges, wallets, or third-party investment platforms, structured products are no longer limited to the yield disaggregation native to protocols, but are instead fully managed by platforms from design to packaging to sales.

These products are mainly aimed at users who want to obtain structured returns but lack the ability to implement complex strategies, reducing the participation threshold through platform design.

Legal Boundaries and Compliance Challenges

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

1. Does it meet the "qualified investor" criteria? Most virtual asset derivatives are considered complex products and are only available to professional investors.

2. Are the channels for capital inflow and outflow compliant? Especially for investors in mainland China, even transferring USDT to overseas platforms may touch upon foreign exchange regulatory red lines.

3. Do you fully understand the product structure? The seemingly simple "lock-up period + annualized return" may hide complex protocol logic behind it.

4. Does the platform have sales qualifications? Some small platforms even lack a registered entity and directly sell products to global users, which may constitute illegal sales of financial products.

How to Comply with Structured Investment Participation?

To comply with structured investments, investors should pay attention to the following points:

1. Establish a clear identity structure, such as offshore SPV, Hong Kong family office, or Singapore exempt fund, to facilitate risk isolation and compliance management.

2. Ensure that the funds' inflow and outflow paths are legal, use bank accounts that match the identity structure, and complete currency exchange and settlement through licensed institutions.

3. Carefully select the platform, paying attention to key information such as its financial product sales qualifications, underlying asset disclosure, and dispute resolution mechanisms.

Structured investments provide Web3 participants with a "controllable entry point", but they are not suitable for all investors. They require a deep understanding of risk mechanisms, careful design of funding paths, and foresight regarding legal responsibilities. Structured investments can only become an effective way to participate in Web3 if the investor possesses the necessary capabilities and is willing to invest time in understanding the product logic.