On-chain finance: On-chain IPOs and on-chain ICOs, a new frontier in the trillion-dollar market

Author: George Qiao Bu Zhi · Elaine Sun

This is a distilled long article about on-chain finance.

The core question is simple:

What happens when asset issuance, distribution, custody, clearing, settlement, and pricing begin to migrate from account systems to wallet systems and blockchain infrastructure?

My core judgment is:

The U.S. exports dollars with stablecoins, outputs assets with on-chain IPOs/ICOs, and exports financial rules with OnFi.

The second core judgment is:

OnFi is not an upgrade of DeFi, but a new distribution layer for the global financial market.

1. Why OnFi is Important

OnFi is not simply "institutional DeFi."

It refers to a new financial system formed after traditional financial functions are brought on-chain:

Issuance, trading, custody, transfer, clearing, settlement, compliance, collateral, financing, and global distribution.

DeFi initially focused mainly on crypto-native assets.

The difference with OnFi is that it focuses on how real assets, securities, stablecoins, tokenized stocks, funds, government bonds, network tokens, and digital goods can be issued, distributed, priced, and settled through blockchain rails.

This is also why OnFi should be understood as a new distribution layer for the global financial market.

2. Three Keywords

To understand the framework of the entire text, one must first understand three keywords:

ONFI/On-chain Finance,

Whitelist Market,

Bluelist Market.

The Whitelist Market is a highly regulated, onshore, KYC, account-based market, primarily served by traditional brokerages, banks, custodians, and regulated exchanges.

The Bluelist Market has a larger cross-border audience. They have a genuine demand for U.S. assets, but the coverage of traditional brokerages and bank account systems is insufficient for them.

The Bluelist Market is not a lawless market, nor is it synonymous with illegal markets.

It refers to a cross-border market where traditional financial services are insufficient, but genuine demand exists.

Wallet-native distribution, stablecoin settlement, and tokenized asset access can precisely serve this demand.

Core conclusion:

U.S. assets need to serve both the Whitelist Market and the Bluelist Market simultaneously.

On-chain channels have the opportunity to reach both.

3. WST and RST: Two Paths for Asset Tokenization

There are two main paths for asset tokenization:

WST: Wrapped Stock Token / Wrapped Model

RST: Registered Stock Token / Registered Model

The Wrapped/WST model uses on-chain certificates or tokens corresponding to off-chain holdings.

It goes live faster, has stronger global distribution capabilities, and is easier to combine with DeFi protocols.

However, WST typically provides users with economic exposure rather than complete registered shareholder identity.

In many cases, users may not have full voting rights or registered shareholder rights.

The Registered/RST model anchors legal ownership through issuer-side registration.

It seeks to achieve a state closer to "token transfer equals ownership transfer."

In simple terms:

WST maximizes reach and distribution.

RST anchors ownership and shareholder rights.

The future is not about one model replacing another.

The future is more likely to be a coexistence of multiple paths.

The same underlying stock may exist in multiple forms in the future:

Traditional street name holdings,

DRS direct registration,

Issuer-sponsored tokenized shares,

And third-party Wrapped/WST tokens.

The key is that each form must clearly disclose the true rights it grants to holders.

4. The Core Spirit of the Clarity Act

The value of the Clarity Act is not just to further clarify the boundaries of SEC and CFTC-style regulation.

Its deeper value lies in potentially providing a lifecycle-based institutional path for projects from early financing to network maturity.

Projects may no longer have to choose between two extreme paths:

Complete registered securities issuance,

Or complete offshore issuance.

They may transition through a set of mechanisms more suited to crypto networks:

Information disclosure,

Financing limits,

Resale restrictions,

Exchange certification,

And decentralized testing.

The Clarity Act has threefold significance.

First, compliant market participants gain certainty.

By more clearly distinguishing the regulatory boundaries between SEC and CFTC-style regulation, the act may reduce uncertainty for exchanges, custodians, brokers, and institutions entering the U.S. market.

Second, true DeFi builders gain protection.

Under specific conditions, non-custodial developers and infrastructure providers should not be simply regarded as money transmission businesses.

Third, the issuance of tokens with blurred boundaries is constrained.

The Clarity Act does not revive the old ICO era.

It pushes token issuance toward clearer classifications, stronger information disclosure, and more disciplined market structures.

From this perspective, it is more beneficial for serious projects rather than insider-driven or loosely structured issuances.

5. Digital Asset Classification

Asset classification is fundamental.

If classifications are unclear, subsequent issuance, trading venues, custody, clearing, settlement, information disclosure, and investor protection will all be unstable.

At the highest level, digital assets can be initially divided by economic substance and regulatory affiliation into:

Digital Commodities,

Digital Securities.

Within digital commodities, the key distinction is:

Network Token,

Ancillary Asset.

Network tokens are closer to the technical core or mature form of blockchain networks.

They may serve functions such as bearing gas fees, acting as a medium of account, or being native network assets.

Ancillary assets are closer to compliant transitional forms.

They may still carry early financing characteristics but do not necessarily grant rights such as dividends or equity.

The clearer the regulatory classification, the easier it becomes to standardize the issuance paths, trading venues, custody, clearing, and compliance interfaces for on-chain IPOs/ICOs.

6. On-chain IPOs and On-chain ICOs

The future market cannot be simply understood as:

IPOs are traditional finance,

ICOs are crypto.

A more accurate division is:

Securities rights go through on-chain IPOs,

Network assets go through compliant ICOs,

Economic exposure products go through WST or derivative-style regulation,

Stablecoins and payment-type assets go through payment and banking regulation,

Funds and yield-type assets go through fund or securities regulation.

The most challenging issue for on-chain IPOs is not price exposure.

The real challenge is:

How does on-chain transfer become a legal transfer of ownership?

This is why transfer agents, issuers, DTC participants, ATS, custodians, brokers, and blockchain infrastructure are all very important.

The true frontier of on-chain IPOs is not just the price exposure of tokenized stocks.

Rather, it is making tokenized securities closer to real ownership.

The issues with on-chain ICOs are different.

They are primarily governed by asset classification, information disclosure, financing limits, decentralized status, and secondary market trading rules.

7. Binance-Alpaca: A Case Study of Infrastructure Collaboration

The Binance-Alpaca collaboration model is worth noting because it demonstrates how a crypto exchange entry can integrate with the API, execution, clearing, settlement, and custody tracks of regulated brokerages.

In this model:

The exchange provides user-facing entry and distribution,

Regulated brokerages provide compliant execution and post-trade infrastructure.

This is not just a product collaboration.

It is more like a preview of the future division of financial infrastructure:

Distribution layer,

Brokerage API layer,

Execution layer,

Custody layer,

Clearing and settlement layer,

Compliance layer.

This analysis focuses only on the collaboration model and business division.

8. Prime Brokerage Transitioning to OnFi

Tokenization is not "another trading category."

It is a comprehensive upgrade of the account, asset, custody, transfer, trading, financing, clearing, and settlement systems.

The functions of prime brokerage are being recombined between on-chain tracks and traditional tracks:

Financing,

Custody,

Clearing,

Settlement,

Securities lending,

Collateral management,

Risk control,

Cross-venue execution.

Brokerages that can connect issuers, transfer agents, DTC participants, ATS, custodians, and wallet-native distribution may be more resilient.

Future brokerages will not just be account providers.

They may become the entry point for OnFi.

This means brokerages need to establish a due diligence framework for tokenized assets.

They need to distinguish:

Issuer-sponsored tokenized securities,

They also need to clarify which assets can:

Be displayed,

Be traded,

Be held in custody,

Be financed,

Or serve as collateral.

This is where traditional prime brokerage may begin to transition to OnFi.

9. How the U.S. Exports Dollars, Assets, and Rules

Stablecoins are already exporting dollars.

They allow dollar-denominated value to circulate globally through wallets, exchanges, payment flows, and on-chain settlements.

On-chain IPOs and on-chain ICOs may further export assets.

They enable U.S. assets, tokenized securities, network assets, and economic exposure to be distributed through blockchain-native channels.

OnFi exports rules.

It exports the standards governing asset flow:

Identity,

Custody,

Settlement,

Disclosure,

Compliance,

Transfer restrictions,

Market access.

This is the deeper strategic point:

Issuance rights and pricing rights go hand in hand.

When U.S. assets are issued, priced, and settled on-chain, in dollars, and under U.S. rules, the distribution of assets simultaneously reinforces the role of the dollar.

This is also why OnFi is not just a technical story.

It is a financial infrastructure story.

10. Conclusion

On-chain IPOs and ICOs are not just faster trading tracks.

They move issuance, pricing, settlement, and distribution to blockchain infrastructure.

WST and RST are not mutually exclusive enemies.

They are two independent and complementary paths.

WST maximizes reach and distribution.

RST anchors ownership and shareholder rights.

The Clarity Act may create a more disciplined lifecycle path for digital assets.

Transfer agents, exchanges, brokers, custodians, and prime brokers may all need to redefine their roles.

The biggest market opportunity is not just token trading.

But the reconstruction of the global financial distribution system.

Final statement:

The U.S. exports dollars with stablecoins, outputs assets with on-chain IPOs/ICOs, and exports financial rules with OnFi.

OnFi is not an upgrade of DeFi.

But a new distribution layer for the global financial market.