Franklin Templeton has received SEC staff clearance to hold its blockchain-based money market fund within conventional mutual funds and ETFs, eight days after the Division of Investment Management issued a letter waiving certain custody rules. The Franklin OnChain U.S. Government Money Fund (FOBXX) reported $721 million in net assets and a 3.50% seven-day yield. Staff attached twelve conditions, including annual board review and independent audits three times per fiscal year. The relief was granted by analogy to a 1992 letter covering a master‑feeder arrangement. The SEC also recently proposed the Regulation Crypto Assets with offering paths of $5 million and $75 million.
Franklin Templeton is preparing to place tokenized assets inside its conventional mutual funds and ETFs, cleared by SEC staff to hold its $721 million blockchain‑based money market fund in those portfolios. The Division of Investment Management wrote on August 12 that its letter “is not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved its content.”
Staff set aside paragraphs (b), (e), and (f) of Rule 17f‑2 under the Investment Company Act of 1940, provisions built around vault custody of share certificates. The Franklin OnChain U.S. Government Money Fund (FOBXX) reported net assets of $721 million on July 31 and a 3.50% seven‑day net yield.
Franklin Templeton Investor Services will open a separate wallet on Stellar for each investment fund. Staff attached twelve conditions, including annual board approval and the power for the transfer agent to correct errors, freeze or migrate wallet records, and restore the official ownership record.
Independent public accountants must verify each fund’s holdings at least three times a fiscal year, two without prior notice. Funds may use the shares for cash balances and securities lending collateral, as BENJI served as collateral in a credit pilot.
Staff granted the position by analogy to a September 24, 1992 letter to Franklin Investors Securities Trust, which covered a master‑feeder arrangement where an affiliated transfer agent held fund shares in book‑entry form. Franklin argued a Stellar wallet raises the same question because the transfer agent still maintains the official ownership record.
The letter names 23 investment managers, including Putnam, Western Asset, ClearBridge, and Royce. Franklin’s digital asset arm passed 50 staff after an agreement to buy 250 Digital, the firm spun out of CoinFund.
On August 18, the SEC proposed the Regulation Crypto Assets with $5 million and $75 million offering paths, a proposed rule carrying a 60‑day comment period. Franklin’s request was signed by Navid J. Tofigh, Senior Associate General Counsel, and answered by Taylor Evenson, Senior Counsel.
