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SEC grants Franklin Templeton nod for tokenized money fund investment

Created at 13 Aug · 12:07 PM1 source↑ Market-relevant
IN SHORT

The U.S. Securities and Exchange Commission (SEC) issued a no-action letter allowing Franklin Templeton's funds to invest in its own tokenized money market fund without adhering to traditional custody rules. This move facilitates the use of blockchain-based assets within established financial structures.

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Key Numbers

$2.5 billionFranklin Templeton's onchain assets under management
12Conditions set by the SEC for the arrangement

Who's Involved

Franklin Templeton
Asset manager receiving SEC approval for tokenized fund investment
Securities and Exchange Commission (SEC)
U.S. regulator issuing no-action letter for tokenized fund
Franklin Templeton Investor Services (FTIS)
Affiliated transfer agent acting as custodian for tokenized funds

↳ Why This Matters

This regulatory green light for Franklin Templeton's tokenized money market fund signifies a crucial step towards integrating blockchain-based assets into traditional financial frameworks, potentially paving the way for broader institutional adoption of tokenized securities.

Key facts

  • Franklin Templeton's funds can now invest in its tokenized money market fund.
  • The SEC granted a no-action letter, exempting the investment from certain custody regulations.
  • Franklin Templeton Investor Services will serve as the custodian for the tokenized assets.
  • The SEC imposed 12 conditions on the arrangement, focusing on system and administrative controls.

The Securities and Exchange Commission (SEC) has granted Franklin Templeton a significant regulatory approval, allowing its funds to invest in the asset manager's own tokenized money market fund. This decision, detailed in a no-action letter issued on Wednesday, permits Franklin Templeton to bypass traditional physical custody regulations for these blockchain-based assets.

The Franklin OnChain U.S. Government Money Fund, which invests in U.S. government securities and aims to maintain a stable $1 share price, will now be accessible for investment by affiliated Franklin Templeton funds. Crucially, the SEC's letter also permits Franklin Templeton Investor Services (FTIS), an affiliated transfer agent, to act as the custodian for these tokenized funds and manage their private keys without being subject to existing physical-custody rules.

This regulatory nod comes in response to a formal no-action request letter submitted by Franklin Templeton. The SEC's approval is contingent upon adherence to 12 specific conditions. These include requirements for Franklin Templeton to implement robust systems that prevent unauthorized instructions and for FTIS to maintain stringent administrative controls, such as the capability to correct, freeze, migrate, or restore records.

Franklin Templeton is a notable player in the tokenized asset space, managing approximately $2.5 billion in onchain assets through its tokenized funds, positioning it as the fifth-largest manager of such assets according to RWA.xyz. The firm has been actively expanding its presence in the crypto and tokenization sector, notably by launching a dedicated crypto division and acquiring crypto asset manager 250 Digital in June.

Frequently asked questions

It is an interest-bearing tokenized fund that invests in U.S. government securities and aims to maintain a stable $1 share price.

A no-action letter is a response from the SEC's staff stating that it will not recommend enforcement action against a specific party for a proposed transaction under certain conditions.

It allows for the use of digital asset custodianship for tokenized funds, bypassing traditional requirements for physical asset custody, which is crucial for the operational efficiency of blockchain-based financial products.

What Happens Next

01Franklin Templeton funds to begin investing in the tokenized money market fund.
02Monitoring of Franklin Templeton's adherence to the SEC's 12 conditions.

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How It Developed

Franklin Templeton received regulatory approval to invest in its tokenized money market fund.
The SEC issued a no-action letter stating it would not pursue enforcement actions under specific conditions.
Franklin Templeton Investor Services will act as custodian for the tokenized funds, bypassing physical custody regulations.
The SEC outlined 12 conditions for the arrangement, including system controls and record management.

Sources

T1
SEC allows Franklin Templeton funds to invest in onchain money fundThe SEC said it will not pursue enforcement action if Franklin Templeton’s funds start investing cash in the asset manager’s own tokenized money market fund.Cointelegraph

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