TLDR
- SEC staff relief allows Franklin funds to invest in its blockchain-based OnChain U.S. Government Money Fund.
- Franklin could use the tokenized money market fund for cash balances and securities lending collateral.
- Traditional ETFs and mutual funds could eventually hold tokenized assets through Franklin’s new investment structure directly.
- Franklin’s OnChain Fund uses blockchain recordkeeping while maintaining an official record of shareholder ownership separately.
- Individual fund boards must approve the arrangements before tokenized assets enter Franklin’s conventional investment portfolios.
Franklin Templeton is preparing to place tokenized assets inside conventional investment funds after receiving SEC staff relief that clears a regulatory path for its blockchain-based money market fund.
SEC Staff Provides No-Action Relief for Franklin Funds
The SEC’s Division of Investment Management issued a no-action letter on August 12 covering investments in the Franklin OnChain U.S. Government Money Fund. The staff said it would not recommend enforcement action if eligible Franklin funds use Franklin Templeton Investor Services as custodian for those investments, provided the firm meets specified conditions.
The SEC made clear that the letter represents a staff enforcement position rather than formal Commission approval or a legal ruling. Franklin funds will also need approval from their individual boards before adopting the arrangement.
Franklin Templeton set to add tokenized money market fund to ETFs & mutual funds…
You read that right.
Tokenized asset held within tradfi investments.
Line b/w tradfi & defi continues to merge.
This is just another step along that path.
via @VildanaHajric @olgakharif pic.twitter.com/bNli8xdJqS
— Nate Geraci (@NateGeraci) August 21, 2026
The relief allows conventional funds to use the OnChain Fund for purposes including managing cash balances and securities lending collateral. That could eventually place blockchain-based assets inside traditional products such as mutual funds and exchange-traded funds.
Franklin could begin introducing the tokenized fund into conventional portfolios as early as the fourth quarter, Bloomberg reported. The timing could vary depending on the approval process for individual funds.
BENJI Could Become a Cash Management Tool
Franklin launched the OnChain U.S. Government Money Fund in 2021, with shares represented by the BENJI token. The fund invests primarily in government securities, cash and repurchase agreements while using blockchain technology for its recordkeeping infrastructure.
The fund uses an integrated system in which blockchain networks record transactions and anonymous shareholder information. Franklin Templeton Investor Services maintains the official ownership record, while Stellar currently serves as the fund’s primary public blockchain.
Franklin sees the tokenized structure as a way to manage fund liquidity more closely through features including hourly net asset value calculations, intraday transactions and faster processing. The company is also exploring additional tokenized products that could serve as cash or collateral across its investment funds.
“We want our funds to experience the efficiency of having a better money market fund option: manage more precisely, capture more of the yield, better and more tightly manage how much cash liquidity they have to hold,” Sandy Kaul, Franklin Templeton’s head of digital assets and innovation, told Bloomberg.
Franklin Expands Tokenization Into Traditional Portfolios
The planned use of BENJI represents a different stage of Franklin Templeton’s blockchain strategy. The asset manager has previously focused on putting traditional investment products on blockchain networks and making them available through digital wallets.
The new structure brings tokenized products inside conventional portfolios rather than only distributing existing investments through blockchain infrastructure. Traditional fund investors could therefore gain indirect exposure to tokenized assets through a fund’s cash management activities without purchasing blockchain-based products separately.
Franklin’s broader BENJI product suite had approximately $1.98 billion in assets under management as of April 29. The firm is now considering other tokenized products that could perform similar cash and collateral functions across its investment lineup.
The move comes as financial institutions expand their use of tokenized securities. The value of tokenized real-world assets has grown to about $38 billion, while asset managers and financial institutions continue testing blockchain infrastructure for settlement, collateral management and investment products.
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