SEC Clears Franklin Templeton to Add Tokenized Fund to ETFs

Franklin Templeton has obtained clearance from the US Securities and Exchange Commission (SEC) to add its tokenized money-market fund, BENJI, to ETFs. This comes as a major development in the adoption of blockchain technology by traditional financial institutions.

The SEC relief allows Franklin's registered mutual funds and ETFs to hold FOBXX shares without adhering to certain custody rules under the Investment Company Act of 1940. The fund boards must approve the arrangement before individual products can adopt it, but Franklin expects implementation as early as the fourth quarter with an earlier start possible.

BENJI is a tokenized version of Franklin's OnChain U.S. Government Money Fund, which records eligible share transactions on public blockchains. Each BENJI token represents one fund share, and its portfolio consists mainly of US government securities, cash, and repurchase agreements backed by government securities or cash.

Franklin plans to use BENJI within its funds to manage cash balances more precisely and reduce the amount of uninvested money held for liquidity needs. According to Sandy Kaul, Franklin's head of innovation and digital assets, 'We want our funds to experience the efficiency of having a better money market fund option: manage more precisely, capture more of the yield, better and more tightly manage how much cash liquidity they have to hold.'

Franklin has already tested both functions outside its conventional fund range. In June, the asset manager added BENJI to MoonPay, allowing eligible institutional clients to exchange stablecoins for shares through MoonPay Trade.