Franklin Templeton Gets SEC Clearance for Tokenized Fund in Traditional Portfolios

Franklin Templeton cleared a regulatory hurdle to bring its tokenized money market fund inside conventional investment funds, after the SEC's Division of Investment Management issued a no-action letter on August 12.

The letter said the SEC staff would not recommend enforcement against Franklin funds using Franklin Templeton Investor Services as custodian for investments in the Franklin OnChain U.S. Government Money Fund, subject to conditions. The SEC stressed the letter reflects a staff position only and does not amount to Commission approval or a legal conclusion.

The relief gives Franklin funds flexibility to use the OnChain Fund for cash management, including cash balances and securities lending collateral. Franklin said the structure could eventually let its tokenized money market fund sit inside ETFs and mutual funds, bringing blockchain-based assets directly into conventional portfolios.

The OnChain Fund uses an integrated recordkeeping system where public blockchain networks record transaction data alongside anonymous shareholder information, while Franklin Templeton Investor Services holds the official ownership record. The fund currently runs on Stellar as its primary public blockchain.