Bybit and Franklin Templeton announced a strategic collaboration on September 28, introducing an off-exchange collateral program for eligible institutional clients. The program allows participants to use tokenized money-market fund shares issued through Franklin Templeton's Benji platform as collateral while trading on Bybit.
Off-Exchange Custody Structure
Rather than transferring collateral directly into an exchange account, institutional participants can hold tokenized fund shares through a supported custody structure and pledge them against trading activity on Bybit. This arrangement keeps assets outside the exchange while still supporting trading positions.
The approach addresses institutional concerns about counterparty risk. By keeping collateral off-exchange, investors can reduce exposure to exchange-specific failures while allowing their assets to continue generating yield from the underlying money-market fund. Bybit gains access to the collateral value without requiring institutions to convert positions into cash or stablecoins first.
Tokenization as Trading Infrastructure
Franklin Templeton's Benji platform provides the blockchain-integrated infrastructure for recordkeeping and transfer of the tokenized fund shares. The collaboration reflects a broader trend of tokenized money-market funds evolving beyond simple on-chain Treasury-like assets to become functional market infrastructure.
The structure separates custody from execution, reducing concentration of risk for institutional traders seeking liquidity and derivatives markets access. This separation has become increasingly important following recent exchange failures and security incidents in the crypto industry.
Bybit and Franklin Templeton indicated plans to explore additional tokenized investment and yield products for wallet-based users beyond the current collateral program, though no timeline or details were provided for those future offerings.
