Franklin Templeton Secures No-Action Relief For On-Chain Custody Of Tokenized Money Market Fund
In Brief
SEC staff grants Franklin Templeton no-action relief for on-chain custody of tokenized fund shares via blockchain-integrated transfer agent.
The U.S. Securities and Exchange Commission’s Division of Investment Management has issued a no-action letter allowing Franklin Templeton’s registered investment funds to hold shares of the firm’s tokenized money market fund through a blockchain-integrated custody system.
The decision, disclosed Wednesday, permits conventional mutual funds and ETFs within the Franklin Templeton family to invest in the Franklin OnChain U.S. Government Money Fund—commonly known as BENJI—for cash management purposes without complying with paragraphs (b), (e), and (f) of Rule 17f-2 under the Investment Company Act of 1940, which govern physical vault custody and certificate notation.
BENJI, which launched on the Stellar blockchain in 2021 and has since expanded to Ethereum and Solana, invests primarily in U.S. government securities and seeks to maintain a stable $1 share price. The fund currently holds approximately $726 million in assets under management, according to data from RWA.xyz.
The SEC staff determined that the proposed arrangement was sufficiently analogous to a 1992 no-action letter also involving Franklin, which permitted affiliated master-feeder fund custody through book-entry records rather than physical certificates. Bloomberg analyst James Seyffart noted that the letter effectively “opens the door” for Franklin’s registered funds to hold the OnChain product despite not technically satisfying traditional 1940 Act custody requirements. The investing funds expect operational benefits including hourly net asset value calculations, intraday trading, faster settlement, and reduced costs.
Custody Architecture and Regulatory Safeguards
Under the approved structure, Franklin Templeton Investor Services (FTIS)—a registered transfer agent and affiliate of the funds—will serve as custodian while maintaining the official master securityholder file through a proprietary system that links internal book-entry records with anonymous transactional data on the blockchain.
FTIS will create and control segregated Stellar wallets for each investing fund, securing private keys through multi-signature and multi-party computation techniques with geographically distributed signers and offline recovery capabilities. Crucially, FTIS retains unilateral administrative authority to correct errors or unauthorized transactions, freeze or migrate wallet records, and restore the official ownership record regardless of blockchain entries.
The staff’s no-action position is conditioned on rigorous ongoing safeguards: each fund’s board of trustees must approve and annually review the arrangement; transaction confirmations must be routed to authorized personnel separate from those initiating instructions; and all activity must undergo daily reconciliation against the fund’s transaction authorizations.
Additionally, independent public accountants must perform at least three verifications each fiscal year—at least two without prior notice—comparing FTIS’s transfer agent records with the books of both the investing fund and BENJI. Transition protocols require FTIS to deliver all administrative controls, smart contract permissions, and official records to any successor transfer agent upon departure. The SEC emphasized that the letter reflects staff views only, carries no legal force, and does not alter or amend applicable law.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
