Regulation
SEC Gives Franklin Templeton Green Light for Tokenized Money-Market Fund Custody
14 Aug 2026, 13:37
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The SEC's investment management staff will not recommend enforcement action against Franklin Templeton's use of a blockchain-based custody setup for its tokenized money-market fund, a decision experts say other asset managers could study closely.
The US Securities and Exchange Commission has given Franklin Templeton regulatory relief to use its tokenized money-market fund across its registered funds, a decision that industry figures say could offer a model other asset managers follow as they explore blockchain-based products.
The SEC's Division of Investment Management said it would not recommend enforcement action if Franklin's funds adopt a new custody arrangement to invest in the Franklin OnChain US Government Money Fund, known as FOBXX, provided the firm follows roughly a dozen conditions. FOBXX launched in 2021 and held about $721 million in assets at the end of July. Under the new setup, each investing fund gets its own blockchain wallet, with transactions checked daily and independent accountants verifying holdings on a regular basis.
The relief addresses a structural mismatch: many SEC custody rules were written decades ago for physical securities, including requirements that certain assets be held in a vault, language that does not translate naturally to a fund whose ownership is recorded electronically on a blockchain. Franklin asked SEC staff for permission to use an alternative arrangement better suited to how FOBXX actually operates.
Industry voices were quick to note the decision's limits. Joao Lages, co-founder of tokenization platform Lympid, said the move is "a powerful precedent" but not "a blank invitation to tokenized funds," since other managers would need to build similar controls around transfer agents, key management and reconciliation. Ryan Haczynski of Web3 infrastructure firm GlobalStake called it a "workable template" that "signals regulatory openness, not a general rule," adding that no-action letters "carry no force of law" and do not bind future SEC leadership.
Franklin has said its funds want to use FOBXX primarily to manage cash and collateral tied to securities lending, a use case Lages believes could become one of the largest applications for tokenized funds going forward, potentially reshaping how asset managers and custodians think about onchain cash management. The decision arrives as the broader tokenization market keeps expanding, with tokenized assets on public blockchains worth roughly $38 billion in early August, of which US Treasury products account for about $16 billion, according to data from RWA.xyz. Clearer, formal SEC rules would still be needed before tokenized structures see wide adoption across mutual funds and ETFs, industry participants caution, but Franklin has shown at least one path that works within the existing regulatory framework.
The SEC's Division of Investment Management said it would not recommend enforcement action if Franklin's funds adopt a new custody arrangement to invest in the Franklin OnChain US Government Money Fund, known as FOBXX, provided the firm follows roughly a dozen conditions. FOBXX launched in 2021 and held about $721 million in assets at the end of July. Under the new setup, each investing fund gets its own blockchain wallet, with transactions checked daily and independent accountants verifying holdings on a regular basis.
The relief addresses a structural mismatch: many SEC custody rules were written decades ago for physical securities, including requirements that certain assets be held in a vault, language that does not translate naturally to a fund whose ownership is recorded electronically on a blockchain. Franklin asked SEC staff for permission to use an alternative arrangement better suited to how FOBXX actually operates.
Industry voices were quick to note the decision's limits. Joao Lages, co-founder of tokenization platform Lympid, said the move is "a powerful precedent" but not "a blank invitation to tokenized funds," since other managers would need to build similar controls around transfer agents, key management and reconciliation. Ryan Haczynski of Web3 infrastructure firm GlobalStake called it a "workable template" that "signals regulatory openness, not a general rule," adding that no-action letters "carry no force of law" and do not bind future SEC leadership.
Franklin has said its funds want to use FOBXX primarily to manage cash and collateral tied to securities lending, a use case Lages believes could become one of the largest applications for tokenized funds going forward, potentially reshaping how asset managers and custodians think about onchain cash management. The decision arrives as the broader tokenization market keeps expanding, with tokenized assets on public blockchains worth roughly $38 billion in early August, of which US Treasury products account for about $16 billion, according to data from RWA.xyz. Clearer, formal SEC rules would still be needed before tokenized structures see wide adoption across mutual funds and ETFs, industry participants caution, but Franklin has shown at least one path that works within the existing regulatory framework.