As the identity restrictions in the secondary market gradually tighten, and with the high thresholds and long cycles of incubation investments, a more flexible and 'configurable' investment method is gaining increasing attention from high-net-worth investors: structured products.
In reality, structured investment is not a new topic exclusive to Web3; it is an 'old play' in traditional finance.
In traditional markets, investment banks often bundle a basket of assets and then layer them: a highly risky layer, such as 'equity' or 'subordinated bonds,' left for investors willing to speculate for returns; a lower-risk layer protects the principal through priority repayment and capital protection mechanisms, attracting more conservative allocation capital.
This logic has now been translated into Web3.
What is structured investment in Web3?
The essence of structured products is to break down a type of 'income right' and reassemble it into a combination that adapts to different risk preferences.
This practice is widely present in traditional finance products such as ABS, CDO, income certificates, and snowball notes. In Web3, this thinking has not been discarded; instead, due to the flexibility of smart contracts and token mechanisms, it has become more programmable and combinatorial efficient.
In the current Web3 market, we can roughly see the following categories of structured products, each representing a typical disassembly idea:
Fixed income products
This is the most common type of structured product. Web3 projects or platforms package part of future income rights, such as staking rewards, DeFi interest, protocol fee sharing, etc., and sell them in the form of 'fixed annualized returns' to attract conservative capital.
The most typical examples are the wealth management and income certificate products launched by major trading platforms. Platforms represented by Binance, OKX, and Bitget mostly offer 'fixed term + annualized' product structures. Assets are locked for 30 days or 90 days, with annualized returns typically between 5%-15%, mainly in mainstream assets like USDT, ETH, and BTC. Some platforms even provide 'principal protection' to lower users' perception of risk.
In addition, some DeFi platforms, such as Pendle Finance, tokenize DeFi income rights into a structure of 'YT (Yield Token) + PT (Principal Token).' Users can choose to purchase only PT to lock in future earnings without bearing the risk of income fluctuations; or they can opt for YT to bet on future interest rate increases. Essentially, this is a layer processing of 'income rights' and 'principal rights' to meet different risk preferences.
Convertible bonds / income certificate products
This type of product appears more in primary investment or project cooperation. It is essentially a 'debt priority + token optional conversion' path: initially providing fixed income stable returns to investors, later triggering conditions to exchange discounted project tokens, balancing conservatism and speculation.
In practice, investors usually obtain the right to purchase future project tokens by signing agreements like SAFT (Simple Agreement for Future Tokens) or Token Warrants. These agreements usually set specific nodes or conditions, such as project launch, reaching a certain development stage, or specific time points.
At the same time, to enhance attractiveness and protect against downside risks, agreements may introduce fixed income clauses, such as paying investors fixed interest quarterly or semi-annually in stablecoins or other assets during the period before tokens are launched. This return allows investors to lock in basic earnings while waiting for the project to advance, significantly reducing the risks they bear.
For example, the Web3 project Astar Network adopted a similar structured financing method during its early financing stage. Investors first entered in the form of debt, enjoying fixed returns; once the project launched and reached a predetermined market value, investors could choose to convert their principal and unpaid interest into project tokens at a predetermined discount ratio.
Risk-layered funds
This is the type with the most 'financial engineering flavor' among all Web3 structured products.
These products usually package a basket of assets and then divide them into different risk levels. The most common structure is the Junior (subordinated) and Senior (priority) two-layer structure: the Junior layer bears the main risk, providing higher returns; while the Senior layer has priority in profit-sharing when the project generates returns and prioritizes protecting the principal in case of losses.
Doesn't it sound a bit like the CDO (Collateralized Debt Obligation) in traditional finance? That's right, it's a chain reconstruction of this classic logic.
A relatively representative Web3 project is Element Finance. This project gained immense popularity in 2021 by separating income rights from principal, creating a dual-layer structure of 'fixed income + high-risk speculation.' In subsequent iterations, it further introduced a risk-layered pool, allowing users to choose to enter a fixed-rate pool (Principal) or yield speculation pool (Yield), essentially corresponding to the senior and junior risk layering ideas.
The core advantage of this structure lies in meeting different investors' preferences through a clear risk-return matching mechanism. For platforms, it also achieves optimized capital allocation, enhancing the overall pool's attractiveness.
However, its weaknesses are also evident. Once market volatility is severe and the main pool assets suffer significant losses, the Junior Tranche, as the 'first line of risk buffer,' will quickly shrink or even be completely wiped out. While the Senior Tranche has priority, if the entire pool’s repayment ability collapses, that priority cannot be realized.
Moreover, as Web3 funds 'come quickly and leave even faster,' during the spread of panic, it often causes a 'trust discount + capital run' double effect, ultimately forming a phenomenon similar to 'structural cascade' in traditional finance.
Platform-based structured products
In the past year, structured investments have begun to shift from protocol-level 'peer-to-peer asset packaging' to a platform-oriented, productized approach. Especially driven by exchanges, wallets, or third-party investment platforms, structured products are no longer merely 'income splitting' from native protocols but are completed as a closed loop of 'design-packaging-sales' led by platforms.
For example, Ribbon will package the volatility returns through automated strategies of option combinations (such as automatically selling covered calls) into structured wealth management products for users to subscribe; Bitget Earn's 'principal protection + floating returns' product links basic stablecoin wealth management with high-risk asset returns, forming a selectable tiered structure;
This type of product typically targets users who lack complex strategy capabilities but wish to obtain structured returns, reducing their participation threshold through platform design.
These structures are not mutually exclusive; some products may even span multiple structures, such as 'income certificates wrapped in risk layers' or 'tokenized bonds segmented into tranches.'
But structured investment is definitely not an entry point that 'is suitable for everyone.'
On the surface, it lowers the participation threshold and increases return flexibility; but when you break down each layer of structure, you will find that its requirements for investors are higher than expected.
Legal boundaries and compliance challenges
Whether it's a token basket packaged by a DeFi protocol or an annualized certificate customized by an exchange, as long as you want to participate, you will face an unavoidable question: is it compliant?
You can ask yourself the following questions.
Are you a 'qualified investor'?
In the traditional financial system, many structured products are 'only sold to qualified investors.' Web3 merely moves the agreement on-chain; the rules have not changed.
Taking Hong Kong as an example, the SFC stipulates: most virtual asset derivatives (such as futures, leveraged tokens, structured income agreements, etc.) are considered complex products and can only be offered to professional investors, not publicly marketed to retail investors. Similarly, the US SEC restricts most structured products involving future token rights, income splitting, and priority sharing to qualified investors under Reg D.
In other words: if you are an individual user and still plan to use 'anonymous wallet + bridge USDT + on-chain participation,' you may have already crossed the line. Even if you seem to be merely 'buying a wealth management product,' in the eyes of regulators, it may be considered unauthorized participation in a Collective Investment Scheme.
How does money come in? How does money come out?
Behind marketing phrases like 'annualized 10%' and 'principal protection structure,' there is actually a more realistic and easily overlooked question: how does the money go in? And can it legally come out?
For mainland Chinese investors, this issue is particularly sensitive. Even transferring a small amount of USDT to an overseas platform may legally touch the red line of foreign exchange regulation. Not to mention that the mainland explicitly prohibits financial activities involving virtual currencies—participation itself carries potential compliance risks.
On the exit side, the situation is equally complex. When you obtain tokens, income certificates, or other structured product returns in the future, in most cases, you must realize fiat conversion through 'stablecoin transfer + OTC withdrawal.' However, once the path involves anonymous accounts or overseas gray platforms, not only is there a risk of bank freezing, but it may also be regarded as 'illegal fund flow' or 'tax evasion,' putting you under close regulatory scrutiny.
Simply put, even if these products seem 'stable,' if your funding path itself is 'unstable,' the entire investment chain has already buried compliance risks.
Do you know what you are buying?
The complexity of structured products lies in the fact that they appear to be wealth management but are essentially a contract combination of agreement logic. You think you are buying 'locked for 30 days, earning 10%', but it might actually be:
Returns during the lock-up period come from tokens that the project has not yet launched;
The principal protection is the platform’s guarantee, but the backing asset is another DeFi strategy with extremely low liquidity;
Or your investment share is the 'Junior Tranche,' with risks hitting you first.
These designs may not be clearly stated on the sales pages. But if you, as an investor, do not understand the underlying mechanisms of the agreements, and you hit a pitfall in the future, regulators will not let you off just because you 'didn't understand.' On the contrary, if you are a high-net-worth investor with a larger participation amount, you may even be deemed to have 'professional judgment,' leading to greater responsibility.
Does the platform have the qualification to sell this to you?
The last question, and also the one many people easily overlook: does the platform you participate in really have the qualifications to sell structured products?
Taking Bitget Earn as an example, it holds VASP licenses in Lithuania, New Zealand, and other locations, allowing it to offer a certain range of wealth management products. However, some smaller platforms and wallets may not even have registered entities and sell 'income certificates' or 'token principal protection packages' directly to global users through websites or Telegram.
Such platforms not only may constitute illegal financial product sales, but if a project or asset pool encounters problems, you may not even find the most basic legal accountability path—because it is not a legally recognized issuer at all.
Ultimately, structured investment is not an 'information war,' but a 'cognitive war.'
Product structures can be complex, but your identity cannot be ambiguous; agreement logic can be abstract, but your funding path must be clear.
Only when all four links—'person-money-platform-path'—are compliant can you truly have the capability to participate in structured products.
How to participate in structured investments compliantly?
Structured products seem to 'wrap layer upon layer,' but what truly determines whether you can participate is not how fancy the yield design is, but these three things: identity, path, and platform.
From a practical perspective, Portal Labs advises investors to clarify at least the following three points:
Don't use 'personal' to take on all compliance risks.
Many investors are accustomed to participating in structured products using 'personal wallets + OTC entry,' but the problem is that once a dispute or compliance review occurs, you will be the first to be exposed. Ambiguous identity is the first fuse of risk.
If you are a high-net-worth user, it is more advisable to establish a relatively clear identity structure before investing, such as:
Offshore SPV (such as Cayman, BVI): used to participate in token-type products, manage token distribution and revenue recovery;
Hong Kong family office structure: facilitates pairing with trading accounts and fiat currency settlement;
Singapore exempt funds: suitable for portfolio strategy management or long-cycle allocation, aiding in tax declaration and compliance with banking channels.
Sometimes, setting a structure is not just for tax purposes, but to give you a clear 'risk isolation zone' when participating in this market.
Where does the money come from? How will it go out?
Many structured products 'run into trouble' not because the product itself is illegal, but because the participation path is illegal, especially when it involves cross-border participation.
Therefore, you can focus on the following measures:
When depositing funds, use a bank account that matches your identity structure to avoid frequent large receipts in personal accounts;
Try to complete foreign exchange and settlement through licensed payment institutions or family office structures, leaving complete invoices and transaction records;
Before withdrawing profits, clarify the 'legitimacy chain' of this money—where it comes from, whether it's compliant, and whether there are tax obligations, instead of waiting until your account is subject to risk control to provide explanations.
The reliability of a platform depends on where it is 'registered.'
Many platforms claim to be 'the world's leading structured asset platform,' but actually, you can't even find where they are registered, let alone their compliance disclosures.
What you should do is not be attracted by advertising phrases but clear up several underlying issues:
Does it have financial product sales qualifications? Such as VASP, fund sales, investment advisory, collective investment licenses, etc.
Does it disclose the underlying assets of the agreement? Is 'principal protection' backed by another illiquid contract pool?
Does it provide a clear dispute resolution mechanism? Including contract arbitration, user rights protection paths, legal entity information, etc.
After all, the more complex the product design and the more 'elegant' the income narrative, the more you need to ask: is this thing really allowed to be sold to me?
Finally, structured investments are not suitable for all high-net-worth investors.
On the surface, it provides more 'configurability'—you can focus only on the principal or speculate on the floating return; you can choose fixed rates or exchange income certificates for future tokens. But this 'flexibility' relies on an understanding of risk mechanisms, the ability to design funding paths, and the awareness of legal responsibilities.
If you're used to 'investing and waiting for appreciation' and hope to exit quickly to reduce complexity, structured products might not be an ideal entry. Because while they seem structurally clear, each layer has hidden rules and leverage; you must know exactly what you're buying to avoid being entirely passive when risks arise.
But if you have certain capabilities in financial structure allocation, have a stable identity structure and funding channels, and are willing to spend time understanding the product's underlying logic, then structured investment can indeed become a 'controllable entry point' for you to participate in Web3. It does not rely on cyclical emotions, does not force technical consensus, but finds your own 'risk/return balance point' in mechanisms.