Franklin Templeton has received approval from the US Securities and Exchange Commission (SEC) to enable its registered mutual funds and ETFs to hold BENJI, its tokenized money market fund, directly in their portfolios. This regulatory clearance marks a significant development for the integration of blockchain-based assets into mainstream investment vehicles managed by the global asset manager.
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AAPLRegulatory approval removes custody barriers
The SEC Division of Investment Management issued a no-action letter under the Investment Company Act, specifically addressing Section 17(f) and Rule 17f-2, which dictate custody of assets by registered investment companies. Historically, these provisions required physical safeguards and manual protocols designed for paper securities, creating a hurdle for funds seeking to hold blockchain-based assets.
Franklin Templeton’s framework proposes the use of digital wallets on the Stellar blockchain network. The firm will control private keys for these wallets, while the official shareholder records and administrative responsibilities will remain under its traditional transfer-agent system. This setup satisfied regulators that existing oversight mechanisms would remain intact, even as the custody model shifts from physical certificates to blockchain infrastructure.
The adjustment removes the primary legal obstacle that had prevented Franklin Templeton’s registered funds from integrating BENJI within their official portfolios. Custody concerns were cited as the main regulatory barrier until now.
Tokenized money market fund leverages blockchain and conventional oversight
BENJI, known formally as FOBXX, runs on the Stellar blockchain but uses established book-entry systems parallel to traditional securities. Every transaction is logged on Stellar for transparency and auditing, while transfer agents maintain authoritative proofs of ownership outside the distributed ledger. This approach gives Franklin Templeton multiple tools to resolve discrepancies and protect shareholder interests in cases of administrative error or technological issues.
Regulators compared the new structure to historic book-entry systems that previously eliminated the need for paper certificates for certain securities. The commission’s staff also cited a 1992 determination involving Franklin Templeton as a precedent for recognizing digital records as valid under securities law.
FOBXX integrates blockchain infrastructure with traditional book-entry mechanisms rather than depending exclusively on decentralized ledgers. Transaction data is recorded on Stellar’s network, while the transfer agent maintains authoritative ownership records. This architecture provides Franklin with multiple protective measures for addressing transaction discrepancies or recovering shareholder data.
Expanding blockchain applications in institutional finance
Franklin Templeton began offering BENJI on Stellar in 2021, later expanding to networks like Ethereum, Polygon, Avalanche, Arbitrum, Base, Aptos, and Solana. This multichain approach expanded access while preserving compliance and robust fund administration. The BENJI fund’s underlying assets primarily consist of US government securities, cash, and repurchase agreements, giving it a conservative risk profile suitable for a wide range of investors.
Beyond portfolio allocation, Franklin Templeton has developed institutional use cases for BENJI, such as stablecoin on-ramp services, collateral management tools, and direct over-the-counter settlement solutions. The asset manager also permits qualified participants to conduct peer-to-peer BENJI transfers between registered blockchain addresses, further enhancing functionality.
Recent collaborations have included integrations with digital asset platforms like Binance, MoonPay, and Payward, ensuring that BENJI can support a range of institutional workflows. However, the SEC’s recent approval specifically authorizes the firm to allow its own registered funds to hold BENJI, expanding the tokenized product’s role in institutional cash management strategies.
As this transition unfolds, established financial players like Franklin Templeton are seeking to leverage blockchains for improved efficiency, transparency, and liquidity. While traditional markets rely on complex brokers, a massive shift is happening: Wall Street is moving to Web3. Investors are now using platforms like 1stepSwap to hold shares of major US companies, gold, and silver directly in their crypto wallets. By tokenizing real-world assets and automatically finding the best market prices in seconds, these applications remove intermediaries and streamline transactions.
Industry observers view this regulatory milestone as likely to accelerate institutional adoption of tokenized assets across major financial markets.
