Franklin Templeton Eyes ETFs for Tokenized Money Market Fund

TLDR

• Franklin Templeton received SEC staff relief to let eligible funds invest in its blockchain-based OnChain U.S. Government Money Fund.
• The tokenized fund could support cash management and securities lending collateral within traditional investment portfolios.
• Franklin Templeton said the structure could eventually bring tokenized assets into ETFs and mutual funds.
• The OnChain Fund uses Stellar as its main public blockchain, while Franklin Templeton Investor Services keeps the official ownership record.
• The fund offers features such as hourly NAV calculations, intraday trading, and faster transaction processing.

Franklin Templeton is preparing to place tokenized assets inside traditional investment funds after receiving SEC staff relief. The move allows certain Franklin funds to invest in shares of the Franklin OnChain U.S. Government Money Fund under stated conditions. That opens a new route for regulated portfolios.

The SEC Division of Investment Management issued the no-action letter on August 12. Staff said it would not recommend enforcement action if Franklin Templeton Investor Services acts as custodian for eligible fund investments.

Franklin Templeton Gains New Cash Management Option

The relief gives Franklin funds another way to manage cash and securities lending collateral. Franklin said its tokenized money market fund could later serve ETFs and mutual funds, bringing blockchain-based fund shares into standard portfolios.

Each fund board must approve the arrangement before use. Franklin said some portfolios could begin using the OnChain Fund in the fourth quarter, depending on those approvals and each fund’s needs.

The OnChain Fund uses blockchain networks to record transactions and anonymous shareholder data. Franklin Templeton Investor Services keeps the official ownership record, while Stellar currently serves as the fund’s main public blockchain.

Franklin said the setup supports hourly net asset value calculations, intraday trading and faster transaction processing. The firm also expects the structure to help funds manage liquidity more closely while reducing operational costs over time.

SEC Relief Comes With Clear Limits

The SEC made clear that the letter reflects only a staff enforcement position. It does not represent formal Commission approval, and it does not provide a legal finding on the structure.

Sandy Kaul, Franklin Templeton’s head of digital assets and innovation, said the firm wants funds to manage cash more precisely, earn more yield and hold less unused liquidity. Franklin also plans more tokenized products for possible use as cash or collateral.

Franklin launched the OnChain U.S. Government Money Fund in 2021. Its BENJI token represents fund shares, and the product became the first U.S.-registered money market fund to use a public blockchain as its official recordkeeping system.

The broader BENJI product suite held $1.98 billion in assets under management as of April 29. Franklin’s next step will depend on fund board approvals and how quickly portfolio teams adopt the tokenized structure.