Franklin Templeton is preparing to integrate tokenized assets into traditional investment funds following a no-action letter from the U.S. Securities and Exchange Commission.
The SEC’s Division of Investment Management issued the letter on August 12, covering investments in the Franklin OnChain U.S. Government Money Fund. The relief permits eligible Franklin funds to utilize Franklin Templeton Investor Services as a custodian for these investments, subject to specific conditions.
SEC staff clarified that the letter does not constitute formal Commission approval or a legal ruling. Instead, it indicates that staff would not recommend enforcement action under the described arrangements.
Flexibility for Cash Management and Portfolios
The regulatory relief provides Franklin funds with greater flexibility to use the OnChain Fund for cash management and securities lending collateral. According to the asset manager, this structure could eventually place tokenized money market fund shares directly into conventional products, such as mutual funds and exchange-traded funds.
Individual fund boards must still approve the arrangements prior to implementation. Bloomberg reported that Franklin could begin utilizing the tokenized fund within conventional portfolios as early as the fourth quarter.
Sandy Kaul, Franklin Templeton’s head of digital assets and innovation, stated that the firm aims to manage fund cash more precisely while earning additional yield and reducing excess liquidity requirements. The company also intends to develop additional tokenized products that can serve as cash or collateral across its investment funds.
The OnChain Fund Structure
Launched in 2021, the OnChain U.S. Government Money Fund uses BENJI tokens to represent fund shares. The recordkeeping structure employs blockchain networks to record transactions and anonymous shareholder information, while Franklin Templeton Investor Services maintains the official ownership record.
Stellar currently serves as the fund’s primary public blockchain. This framework supports features such as hourly net asset value calculations, intraday trading, and faster transaction processing, which Franklin highlights as benefits for cash management.
The wider BENJI platform managed $1.98 billion in assets as of April 29. As part of its broader digital asset expansion, Franklin also plans to acquire crypto investment company 250 Digital, with the transaction expected to close in the second quarter of 2026, subject to required approvals and closing conditions.
