Franklin Templeton’s registered mutual funds and ETFs have received regulatory clearance to invest in the firm’s blockchain-based OnChain U.S. Government Money Fund after the U.S. Securities and Exchange Commission’s investment management division issued a no-action letter covering the custody structure.
Summary
- The SEC has cleared Franklin Templeton’s registered funds to invest in its blockchain based BENJI money market fund.
- The no action letter allows mutual funds and ETFs to hold BENJI shares without meeting certain physical custody requirements.
- BENJI uses blockchain records alongside Franklin’s traditional transfer agent system, with private keys remaining under the firm’s control.
- The fund holds about $726 million in assets and invests primarily in U.S. government securities.
The SEC’s Division of Investment Management said in the letter posted Wednesday that it would not recommend enforcement action under Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940 if Franklin’s registered funds hold shares of the OnChain U.S. Government Money Fund, known by its ticker FOBXX, under the proposed arrangement.
The relief addresses custody rules originally designed around physical securities and vault storage. Franklin’s structure instead combines its existing transfer-agent records with blockchain transaction data, allowing registered funds to use FOBXX for cash management without complying with several requirements tied to physical certificates.
Bloomberg ETF analyst James Seyffart described the decision as a route for Franklin’s conventional investment products to gain direct exposure to the blockchain-based fund.
“Essentially, it opens the door for Franklin’s registered funds (mutual funds, ETFs, etc) to hold its OnChain fund despite not technically satisfying 1940 Act custody rules,” Seyffart said on X.
SEC clears Franklin Templeton funds to hold BENJI shares
Under the proposed setup, Franklin Templeton Investor Services will create blockchain wallets for registered funds investing in FOBXX and retain control of the corresponding private keys.
Franklin’s affiliated transfer agent will also maintain the official shareholder record and retain control over administrative functions. The arrangement gives the transfer agent the ability to correct blockchain-related errors and restore records when required, according to the SEC letter.
FOBXX uses an integrated record-keeping model rather than treating the blockchain as the only record of ownership. Internal book-entry records operate alongside transaction records maintained on Stellar, while the transfer agent remains responsible for the official shareholder file.
The SEC found the structure sufficiently similar to book-entry custody arrangements it had previously considered, allowing Franklin’s funds to operate without meeting certain provisions of Rule 17f-2 that were written around physical securities.
In reaching its position, the agency also cited a 1992 no-action letter involving Franklin. The earlier regulatory treatment provided precedent for applying the custody framework to securities represented through book-entry systems rather than physical certificates.
For Franklin’s registered funds, the decision provides access to FOBXX as a cash-management instrument while retaining the controls maintained by the affiliated transfer agent. The fund’s blockchain infrastructure can process transactions while its traditional record-keeping layer remains part of the ownership system.
Franklin Templeton has expanded BENJI’s institutional uses
Franklin has spent the past several years adding ways for financial institutions to use shares of its tokenized money market fund outside a conventional fund account.
In June, crypto.news previously reported that Franklin Templeton had added BENJI to MoonPay Trade, allowing institutional clients to exchange stablecoins including USDC and USDT for shares of the fund through MoonPay’s onchain trading infrastructure.
Franklin said at the time that the integration could support treasury management, portfolio rebalancing, collateral and liquidity functions. MoonPay Trade, launched in May, provides institutional clients with onchain execution and access to more than 200 blockchain networks through a single API.
A separate integration announced in May brought BENJI into Payward, the parent company of Kraken. Under the Franklin-Payward partnership, the fund was positioned for use as collateral and cash-management infrastructure while the companies also planned work on tokenized stocks and other onchain investment products.
Franklin had already moved BENJI into crypto trading collateral earlier in the year. In February, the asset manager and Binance launched an institutional program allowing eligible clients to pledge tokenized money market fund shares as off-exchange collateral while the underlying assets remain in regulated custody.
Under the off-exchange collateral structure, the value of the pledged assets can be used within Binance’s trading environment without requiring institutions to transfer the underlying fund shares onto the exchange.
The SEC no-action position deals with a different use of FOBXX: registered Franklin funds investing directly in shares of the tokenized money market fund under the Investment Company Act custody framework.
FOBXX uses blockchain records alongside traditional controls
Franklin launched FOBXX on Stellar in 2021, making it one of the earliest U.S.-registered investment funds to use a public blockchain for transaction processing and ownership records.
Shares are represented through BENJI, while the underlying portfolio is primarily invested in U.S. government securities. The money market fund seeks to maintain a stable $1 share price.
Blockchain support has expanded substantially since the Stellar launch. In February 2025, Franklin added FOBXX to Solana, following deployments across networks including Aptos, Ethereum, Avalanche, Arbitrum, Base and Polygon.
At least 99.5% of FOBXX’s assets were invested in U.S. government securities, cash, and repurchase agreements when the Solana deployment was announced. Stellar remained the original network for the fund and continues to account for the largest portion of its blockchain-based assets.
The fund has roughly $726 million in assets under management, according to RWA.xyz data cited in the source report, with most of the assets recorded on Stellar.
Franklin has also progressively added transfer functions to BENJI. In April 2024, the firm enabled peer-to-peer transfers of fund shares on Stellar and Polygon, allowing eligible investors to move BENJI directly between one another without an intermediary handling each transfer.
The fund had about $380 million in assets when the transfer feature was introduced. Each BENJI token represented a share in FOBXX, whose portfolio included government securities, cash and repurchase agreements.
Franklin has continued building its crypto business
Alongside the tokenized fund, Franklin Templeton has expanded its digital asset operations through acquisitions, exchange products and institutional partnerships.
In June, Franklin completed its acquisition of crypto asset manager 250 Digital and formed Franklin Crypto, combining the acquired investment team and strategies with its existing digital asset operations. The firm managed about $1.78 trillion in assets worldwide at the time.
The 250 Digital acquisition followed Franklin’s work on crypto-focused investment products and partnerships involving tokenized assets. RWA.xyz data cited in the June report put Franklin Templeton’s total tokenized assets at more than $2.5 billion, up from roughly $768 million a year earlier.
FOBXX itself dates back to 2021, while Franklin’s use of blockchain networks for the fund has expanded in stages. When the product was extended to Polygon in April 2023, it had more than $270 million under management and was described as the first U.S.-registered fund to use blockchain technology to process transactions and record share ownership.
The SEC’s latest letter preserves the transfer agent’s role within that system. Franklin Templeton Investor Services will maintain control of the Stellar wallets and private keys used by investing funds, while the affiliated transfer agent will continue to maintain the official shareholder records and the administrative ability to correct or restore them when necessary.
