SEC Clears Path for Traditional Funds to Enter Blockchain Space

The U.S. Securities and Exchange Commission (SEC) has issued a no-action letter to Franklin Templeton, allowing its registered funds to hold on-chain government money market fund shares without violating custody rules under the Investment Company Act of 1940.

This is significant for the asset management industry as it provides a regulatory pathway for traditional funds to incorporate blockchain-based assets. The SEC's decision could have broader implications beyond Franklin Templeton, potentially leading to a wave of tokenized fund offerings.

The no-action letter does not change the law but provides a safe harbor for Franklin Templeton under specified conditions. This means its registered funds can now explore holding on-chain government money market fund shares without facing immediate regulatory action.