Franklin Templeton has officially launched two exchange-traded funds that convert stock dividends from large U.S. companies into bitcoin, with the resulting crypto sleeve growing alongside every payment. The Franklin U.S. Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin U.S. Innovation Bitcoin DRIP Index ETF (FIBT) now trade on Nasdaq.

The launch completes the final regulatory step in a process that began in June, when registration filings for both funds arrived at the Securities and Exchange Commission without tickers or fee details. Franklin filed updated registration papers with the SEC on October 22, and four months after the initial submission, the full specifications are now public, per the company's official press release. The debut arrives in a U.S. market where regulated bitcoin access has broadened since spot bitcoin exchange-traded funds began trading in January 2024, and where large asset managers have steadily extended crypto exposure into conventional fund wrappers.

How the funds work

FBEQ tracks the VettaFi U.S. Large-Cap 500 Bitcoin DRIP Index, which holds the 500 largest U.S. companies by market capitalization, weighted by float-adjusted market cap. As of September 30, the index held 499 stocks ranging in size from $10.2 billion to $5.5 trillion, with the heaviest concentration in information technology.

At inception, the index allocates 95% of its portfolio to those stocks and 5% to bitcoin. Every dividend the constituent companies pay—whether regular or special—is reinvested into BTC at the market open on the day after the ex-date, meaning the bitcoin share of the portfolio grows with each payment.

A traditional dividend reinvestment plan, or DRIP, uses cash dividends to buy additional shares of the company that paid them. Franklin's version routes that cash into BTC instead. For investors, the dividend stream generated by America's largest companies becomes a recurring bitcoin purchase that requires no exchange account, no wallet and no custody decisions. The structure repurposes a compounding habit income investors have practiced for decades—automatically reinvesting payouts—and points it at a new asset, all inside a standard brokerage product.

The bitcoin position is subject to strict limits. At each quarterly rebalance, any allocation above 5% is trimmed back to 4.5%. If bitcoin exceeds 20% of the index between rebalances, the index cuts it to 4.5% within two business days, with the proceeds returned to stocks. The result is a stock fund with a bitcoin sleeve—structurally distinct from a dedicated bitcoin fund. How quickly the sleeve approaches those ceilings will depend on dividend flows and market moves between rebalances, dynamics that will become clearer as the funds build a trading record.

Notably, the fund holds no bitcoin on-chain. It obtains exposure through bitcoin exchange-traded products, including Franklin Templeton's own spot bitcoin fund, through bitcoin futures and options, or through depositary receipts—in some cases via a Cayman Islands subsidiary.

FBEQ carries a 0.09% expense ratio and charges no 12b-1 fee. Franklin Advisory Services manages the fund, with Franklin Templeton Institutional serving as sub-advisor.

Bitcoin as a mature, investable asset

"Bitcoin has matured as an investable asset, supported by deeper market infrastructure, broader adoption and a growing understanding of the role it can play in portfolios," said Dina Ting, SVP and Head of Index Investments at Franklin Templeton. "A systematic approach to building exposure is one way to address this next stage of adoption."

Jeff Masom, Head of U.S. Distribution and Global Wealth Management Private Markets, framed the funds as a new way to combine U.S. equities and bitcoin through a differentiated index methodology. FIBT, the second of the two launches, applies the same dividend-to-bitcoin mechanic to an innovation-focused slice of the U.S. market, with its full specifications included in the same public filings.

This article first appeared on Bitcoin Magazine and was written by Micah Zimmerman. Source: Franklin Templeton Officially Launches 2 Bitcoin DRIP ETFs That Turn Dividends Into Bitcoin.