Franklin Templeton Brings Tokenized Fund Into Traditional Portfolios

Franklin Templeton is preparing to bring tokenized assets into conventional investment funds after receiving Securities and Exchange Commission (SEC) staff relief for its blockchain-based money market fund.

The asset manager plans to use its Franklin OnChain U.S. Government Money Fund, known as BENJI, as a holding or collateral inside ETFs and mutual funds. Arrangements could take effect as early as the fourth quarter, subject to individual fund board approval.

According to a ‘no-action letter’ issued by the SEC’s Investment Management division on August 12, eligible Franklin funds can use Franklin Templeton Investor Services as custodian, provided they meet specific conditions.

While the letter is not formal SEC approval, it suggests that there would be no push for enforcement based on Franklin’s outlined approach.

Sandy Kaul, Franklin’s head of digital assets and innovation, said the firm wants its funds to “manage more precisely, capture more of the yield” and better control how much cash they hold, and added: “This is the first time the SEC has said a digitally native product can be used in traditional financial products.”

Franklin’s move extends blockchain use beyond tokenized investment products. The firm says the technology could improve cash management, liquidity and yield within conventional funds.

According to data provider rwa.xyz, the market value of tokenized assets has reached a high of approximately $38bn over the past 12 months.

Franklin added that it plans to issue additional tokenized products that could eventually be used as cash or collateral across its fund lineup.