Key facts
- Franklin Templeton received no-action relief from SEC staff for its tokenized U.S. government money market fund.
- Eligible Franklin funds can now invest in the Franklin OnChain U.S. Government Money Fund.
- The relief allows the use of Franklin Templeton Investor Services as a custodian for these investments.
- This move could lead to tokenized money market fund shares being held within traditional mutual funds and ETFs.
- Franklin aims to improve cash management, increase yield, and reduce liquidity requirements through tokenization.
Franklin Templeton is poised to integrate tokenized assets into traditional investment funds following a no-action letter issued by SEC staff on August 12. The relief specifically covers investments in the Franklin OnChain U.S. Government Money Fund, allowing eligible Franklin funds to utilize Franklin Templeton Investor Services as a custodian for these blockchain-based assets under certain conditions.
While not a formal Commission approval, the SEC staff's stance indicates they would not recommend enforcement action for the described arrangements. This regulatory flexibility is expected to empower Franklin funds with enhanced capabilities for cash management and as collateral for securities lending. The asset manager anticipates this structure could eventually facilitate the direct inclusion of tokenized money market fund shares within conventional investment vehicles such as mutual funds and exchange-traded funds.
Bloomberg reported that Franklin Templeton could begin implementing these tokenized investments into traditional portfolios as early as the fourth quarter, pending approval from individual fund boards. Sandy Kaul, Franklin Templeton’s head of digital assets and innovation, highlighted the firm's objective to achieve more precise fund cash management, generate additional yield, and reduce excess liquidity requirements. The company also intends to develop further tokenized products for use as cash or collateral across its diverse investment funds.
The Franklin OnChain U.S. Government Money Fund, established in 2021, utilizes BENJI tokens to represent its shares. Its recordkeeping system leverages blockchain networks for transaction recording and anonymous shareholder information, with Franklin Templeton Investor Services maintaining the official ownership registry. The fund primarily uses the Stellar blockchain, which supports features like hourly NAV calculations and intraday trading, identified as beneficial for cash management operations.
As of April 29, the broader BENJI platform managed $1.98 billion in assets. Franklin Templeton continues to expand its digital asset initiatives, focusing on developing blockchain-based investment products for both institutional and traditional financial markets. The firm has also announced plans to acquire crypto investment company 250 Digital, with the acquisition anticipated to close in the second quarter of 2026, subject to regulatory and closing conditions.