The asset management giant Franklin Templeton is poised to integrate tokenized assets into its conventional mutual funds and exchange-traded funds (ETFs), following clearance from the US Securities and Exchange Commission (SEC). The move follows staff approval for its $721 million blockchain-based money market fund, which permits the use of Stellar wallets for fund holdings, subject to 12 conditions outlined by regulators.
The SEC’s Division of Investment Management issued a statement on August 12 clarifying that the approval is not a formal rule or regulation but reflects a 1992 precedent involving a similar structure for a master-feeder fund arrangement. Franklin OnChain U.S. Government Money Fund (FOBXX), which reported net assets of $720.9 million on July 31, is expected to leverage this framework to expand its use of tokenized assets.
The approval requires annual board reviews, independent audits, and adherence to specific governance measures. The 1992 letter referenced by the SEC outlined conditions for a fund using book-entry shares, a model Franklin Templeton’s subsidiary, Franklin Templeton Investor Services, now seeks to adapt for blockchain-based holdings.
Stellar, the blockchain platform chosen for the initiative, will facilitate separate wallets for each investment fund. The firm’s digital asset arm, 250 Digital—acquired from CoinFund—will oversee the integration. Separately, a December report by CryptoPotato highlighted the use of BENJI as collateral in a pilot involving SemiLiquid credit, though this remains distinct from the current SEC clearance.
The SEC’s August 12 statement emphasized that the approval does not constitute endorsement of the fund’s structure, reiterating that the Commission “has neither approved nor disapproved its content.” The conditions attached to the clearance underscore ongoing regulatory scrutiny of blockchain innovations in traditional finance.
Written by Steven Cook
Regulation Desk
