Franklin Templeton has completed the final regulatory step ahead of launching two exchange-traded funds that convert stock dividends into bitcoin.

On October 22, the asset manager filed a Form 8-A with the Securities and Exchange Commission to register shares of the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF for trading on Nasdaq. Form 8-A is the form securities use to register for trading on a national exchange, which is why the filing counts as the last gate before launch. A prospectus filed the same day lists an effective date of October 27.

Both funds were first filed in June without tickers or fee disclosures — issuers commonly add such details as the review process advances. Four months later, those details are now on the record.

How the Funds Work

The equity fund, trading under ticker FBEQ, tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index. The benchmark holds the 500 largest U.S. companies by market capitalization, weighted by float-adjusted market cap. As of September 30, it comprised 499 stocks ranging in size from $10.2 billion to $5.5 trillion, with a heavy concentration in information technology.

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

A conventional dividend reinvestment plan, or DRIP, uses dividend cash to buy more shares of the company that paid it. Franklin's version instead routes that cash into bitcoin. For shareholders, the dividend stream generated by the largest companies in America becomes an automated, recurring bitcoin purchase, with no exchange account, no wallet, and no custody decisions required.

The bitcoin allocation is capped. At each quarterly rebalance, any allocation above 5% is trimmed back to 4.5%. If bitcoin exceeds 20% of the index between rebalances, it is cut back to 4.5% within two business days, with the proceeds returned to stocks. The result is a stock fund with a bitcoin sleeve, not a bitcoin fund.

The ETF does not hold bitcoin on-chain. It gains exposure through bitcoin exchange-traded products, including Franklin's own spot fund, as well as bitcoin futures and options, or depositary receipts, in some cases via a Cayman Islands subsidiary — a structure funds commonly use for tax-efficient derivatives exposure.

FBEQ carries a 0.09% expense ratio with no 12b-1 fee, the recurring marketing and distribution charge some funds add. Franklin Advisory Services manages the fund, with Franklin Templeton Institutional as sub-advisor. Dina Ting, Hailey Harris, Joe Diederich and Basit Amin serve as portfolio managers.

The Innovation fund applies the same mechanics to the VettaFi US Innovation 100 Bitcoin DRIP Index, which draws from the 100 largest non-financial companies listed on Nasdaq — a construction that echoes the Nasdaq-100.

A Deepening Bitcoin Push

The new products build on Franklin Templeton's broader bitcoin strategy. The firm filed for a spot bitcoin ETF in September 2023 and launched it as EZBC in January 2024. In April, it acquired 250 Digital and formed Franklin Crypto, an institutional digital asset division. Chief Executive Jenny Johnson has argued that blockchains threaten Wall Street's fee structure more than its technology.

The DR funds extend that approach to investors who may never buy bitcoin on their own. A retiree holding an S&P 500-style fund in a brokerage account can, through FBEQ, let dividends from companies she already owns build a bitcoin position over years.

The prospectus cautions that investors can lose money and that bitcoin's price swings may affect the fund's net asset value. Whether that trade-off appeals to the audience Franklin Templeton is targeting will become clear after October 27.

This article first appeared on Bitcoin Magazine and was written by Micah Zimmerman.