- Franklin Templeton has secured regulatory relief allowing its registered funds to use digitally native fund shares.
- BENJI can serve as a cash-management position or securities-lending collateral inside conventional portfolios.
- Implementation could begin as early as the fourth quarter, subject to individual fund board approval.
- The strategy moves tokenization from investor distribution into the internal operation of traditional funds.
Franklin Templeton is preparing to integrate tokenized assets directly into its conventional ETFs and mutual funds, pushing blockchain infrastructure deeper into everyday asset management. According to Wealth Management, the plan follows SEC relief that clears the way for Franklin’s registered funds to use shares of its onchain U.S. government money market fund for cash management and collateral, potentially beginning as early as the fourth quarter.
From Selling Tokenized Funds to Using Them Inside Portfolios
Franklin Templeton has spent years building products whose ownership can be recorded and transferred using blockchain infrastructure. The latest step reverses that relationship.
Instead of blockchain simply changing how investors access a fund, tokenized instruments can now become part of how Franklin manages other funds.
The Franklin OnChain U.S. Government Money Fund, or FOBXX, is the central product. Its blockchain-recorded shares are commonly associated with the BENJI token and can be accessed through Franklin’s Benji platform. The underlying portfolio itself remains conventional: at least 99.5% of assets are invested in U.S. government securities, cash and fully collateralized repurchase agreements.
That distinction matters. Franklin is not proposing to fill conventional mutual funds with cryptocurrencies. It is using a blockchain-native representation of a regulated money market fund as part of traditional portfolio operations.
The SEC relief allows Franklin’s registered funds to use those shares for purposes including excess cash management and collateral connected with securities lending.
Why BENJI Could Change How Franklin Manages Idle Cash
The operational argument centers on cash efficiency.
ETFs and mutual funds routinely maintain liquidity for redemptions, portfolio transactions and other obligations. Cash provides that flexibility but creates a trade-off because money sitting idle may earn less than assets placed in short-term government instruments.
A tokenized money market position potentially makes that balance easier to manage.
Franklin’s head of digital assets and innovation, Sandy Kaul, said the firm wants its funds to manage liquidity more precisely while capturing more yield on cash positions.
In practice, BENJI could give a portfolio manager another instrument for moving between operational liquidity and an interest-bearing government money market exposure.
There is a second use case: collateral.
Securities lending requires funds to manage collateral received or posted against transactions. A digitally native money market instrument could eventually make those movements easier to integrate with blockchain-based settlement systems, particularly as more financial counterparties adopt tokenized collateral.
This is where Franklin’s strategy becomes more significant than another tokenized Treasury launch. The blockchain component is being positioned as financial plumbing inside an existing investment product, rather than as the product investors specifically come to buy.
The Potential Reach Goes Well Beyond One Tokenized Fund
Franklin’s conventional fund business gives the initiative considerable room to expand.
According to figures provided by the company, the asset manager operates more than 130 ETFs globally with approximately $82 billion in assets, while its mutual funds oversee roughly $790 billion.
Only a portion of those assets would ever need to sit in money market instruments or collateral positions. Even so, bringing tokenized holdings into a fund complex of that scale creates a different adoption channel from selling blockchain products directly to crypto-native investors.
Franklin says its tokenized money market fund business has about $2.6 billion in assets under management, and the firm intends to develop additional digitally native products that could eventually function as cash or collateral across its investment lineup.
The firm’s blockchain infrastructure is already established beyond the United States.
Franklin says its Benji Technology Platform has supported tokenized products across multiple markets, including a fully tokenized UCITS fund launched in Luxembourg and a retail tokenized fund introduced in Singapore.
Why the SEC Clearance Matters
The regulatory change is more specific than a broad SEC endorsement of tokenized securities.
According to reporting on the SEC relief, the agency’s Division of Investment Management issued a no-action position covering how Franklin’s registered funds can hold shares of the tokenized money market vehicle without satisfying certain custody provisions of Rule 17f-2 that were designed around physical securities certificates.
Those legacy requirements matter because a blockchain-recorded fund share does not fit naturally into rules written around certificates physically stored in vaults.
Removing that mismatch allows Franklin to use digitally native fund shares without first forcing them into an operational structure designed for another era of securities recordkeeping.
Individual funds still have another hurdle. Kaul said fund boards must approve the use of the tokenized holdings before they are incorporated into portfolios.
That means the fourth-quarter timetable represents the earliest potential deployment rather than a guaranteed fund-wide conversion date.
Tokenization Is Moving Into the Back Office
Much of Wall Street’s first tokenization cycle concentrated on issuance.
Asset managers took Treasury bills, money market funds, private credit and other conventional securities and created blockchain-based representations of them. The investor still bought an identifiable “tokenized product.”
Franklin’s approach creates a less visible second stage.
An investor could buy shares in an ordinary ETF or mutual fund while the portfolio itself uses tokenized instruments for liquidity or collateral management. The end investor would not necessarily need a crypto wallet, interact with a blockchain or deliberately select a tokenized investment.
That changes the adoption equation.
Tokenization no longer needs to persuade every investor to change how they buy financial products. Instead, asset managers can adopt the infrastructure internally where they believe it improves settlement, collateral mobility or cash utilization.
The broader industry is moving in a similar direction. BlackRock, BNY and other large financial institutions have expanded their work with tokenized funds and blockchain-based financial infrastructure, while the value of tokenized real-world assets has increased substantially.
Franklin Is Testing Whether Blockchain Can Improve Fund Economics
The more meaningful benchmark will not be how many BENJI tokens Franklin moves between wallets.
It will be whether tokenization produces measurable improvements in portfolio operations.
For fund managers, that could mean reducing unnecessary cash balances, earning yield for a greater portion of the day, moving collateral more efficiently or eventually coordinating settlement across systems without relying on the same operational windows used by legacy infrastructure.
Those benefits are not automatic. Funds still operate inside regulated securities markets, with valuation, liquidity, custody and board-governance requirements that cannot simply be bypassed because an asset exists on a blockchain.
Franklin’s advantage is that BENJI is already a regulated money market fund rather than an attempt to replace traditional fund regulation with an entirely new structure.
The fourth quarter will therefore provide an early test of a different model for institutional tokenization. Instead of asking whether traditional assets can move onchain, Franklin is preparing to find out whether onchain assets can become routine components of traditional portfolio management.