SEC Clears Franklin Templeton to Hold Blockchain Fund Inside Conventional Portfolios

Franklin Templeton has won SEC staff relief to hold its $721 million blockchain-based money market fund, Franklin OnChain U.S. Government Money Fund (FOBXX), inside its conventional mutual funds and ETFs. This is considered a significant milestone in the adoption of tokenized assets by traditional investment companies.

The SEC's Division of Investment Management cleared Franklin Templeton to hold its digitally native product within conventional funds, citing a 1992 letter as precedent. The letter allowed an affiliated transfer agent to hold fund shares in book-entry form, and Franklin argued that a Stellar wallet raises the same question. The firm will open a separate wallet on Stellar for each investment fund.

Twelve conditions were attached to this relief, including requirements for annual reviews by the board of trustees and verification of holdings by independent public accountants at least three times a year. Funds must also use shares for cash balances and securities lending collateral.