The U.S. Securities and Exchange Commission's Division of Investment Management has issued a staff no-action and interpretive letter addressed to Franklin Templeton, clearing Franklin Funds to use an onchain money fund for cash management and collateral posting.

The clearance is narrowly scoped. It represents a staff-level position rather than a formal rule change or full Commission approval, and it applies specifically to Franklin Funds' use of an onchain money fund for two designated purposes: holding cash and posting collateral. While no-action letters do not carry the force of Commission-level rulemaking and are non-binding outside the specific facts addressed, they create a referenceable precedent that other fund managers may cite when pursuing similar arrangements.

Franklin Templeton's Tokenized Fund Preparations

Franklin Templeton has previously described its efforts to prepare institutional money market funds for tokenized finance, according to a company press release tied to the development. The fund at the center of the clearance is Franklin's onchain U.S. Government Money Fund, a regulated money market product tracked on its official product page.

Running a money fund onchain means that shares and records are maintained on a blockchain, which positions the staff letter as a market-structure development rather than a routine fund filing. Franklin's onchain U.S. Government Money Fund (FOBXX) was among the first U.S.-registered mutual funds to record share ownership and process transactions on a public blockchain, having launched on Stellar and subsequently expanded to additional networks including Polygon and Arbitrum.

Cash and Collateral Workflows

Cash and collateral serve distinct functions in fund operations. Cash covers day-to-day liquidity and settlement, while collateral is posted to back positions or obligations. The SEC staff clearance links the same onchain money fund to both functions, permitting a regulated fund product to be sanctioned by SEC staff for use in institutional cash and collateral flows.

Reporting on the program has connected it to institutions trading tokenized money funds and using them as collateral, as detailed by The Block.

Regulatory Significance

From a regulatory-news perspective, the staff involvement is what makes the clearance notable. It represents a concrete fund use case rather than a broad policy shift, and the clearance should be read only against the specific Franklin Funds facts it addresses. Independent reporting on the development has also appeared in The Defiant.

The SEC staff letter is available on the Commission's website.

The move adds to broader momentum for regulated financial products moving onchain. Asset managers including BlackRock, with its BUIDL tokenized treasury fund, and Ondo Finance have expanded the tokenized money market landscape, and whether additional fund sponsors pursue comparable staff-level clearances may signal how quickly institutional onchain cash and collateral infrastructure develops. For now, the clearance stands as a real-world adoption signal grounded in one fund manager's specific use case, rather than a sweeping endorsement of tokenized fund infrastructure.