The U.S. Securities and Exchange Commission's Division of Investment Management issued no-action relief to Franklin Templeton on August 12, 2026, allowing the firm's registered funds to use its OnChain U.S. Government Money Fund for cash management and securities lending collateral.

The OnChain U.S. Government Money Fund, which launched in 2021 on the Stellar blockchain, was among the first U.S.-registered mutual funds to process transactions and record ownership data on a public distributed ledger. The new no-action relief extends that infrastructure from a standalone product to a tool that Franklin Templeton's broader fund complex can use internally—a notable expansion of blockchain-based recordkeeping within a regulated fund family.

The relief covers blockchain-based custody and ownership recordkeeping, replacing certain physical-security requirements under the Investment Company Act's Section 17(f) and Rule 17f-2, paragraphs (b), (e), and (f). Section 17(f) governs how registered investment companies must safeguard their assets, traditionally requiring physical securities or bank custody arrangements. The SEC staff letter applies to enforcement considerations only and does not amend existing law or create new legal obligations. It is also specific to Franklin Templeton's described arrangement and does not automatically extend to other firms or blockchain platforms.

Blockchain Custody Framework

Under the arrangement, Franklin's funds will hold OnChain Fund shares through Franklin Templeton Investor Services LLC (FTIS), which serves as transfer agent and maintains the official ownership record. The system pairs an internal book-entry database with blockchain records covering purchases, redemptions, dividends, net asset values (NAVs), and trade dates. FTIS links these records in real time to construct the master securityholder file and retains control over blockchain permissions, smart contracts, and administrative functions tied to ownership records.

Each investing fund will receive a separate wallet on the Stellar blockchain, with private keys held by FTIS. The wallet infrastructure employs multisignature authorization, multiparty computation, distributed signers, and offline recovery procedures. FTIS retains administrative authority to correct errors, freeze wallets, migrate records, or restore ownership data. Franklin Templeton highlighted benefits including hourly NAV reporting, intraday trading capability, and accelerated processing.

Oversight Conditions

The SEC staff established several conditions for fund oversight:

• Each fund must maintain controls over authorized instructions and transaction reviews.
• FTIS must provide transaction confirmations and keep segregated records for each fund.
• Each fund's board of directors must approve the arrangement and conduct an annual review.
• FTIS must be able to transfer records and administrative controls to a successor.
• Independent public accountants must compare FTIS records against fund records, performing at least three investment verifications per fiscal year, with a minimum of two conducted without advance notice.
• Funds must reconcile any discrepancies identified during these examinations.

The SEC staff noted that the no-action letter addresses enforcement considerations exclusively and neither modifies existing statutes nor establishes new regulatory requirements. Whether other fund complexes pursue similar arrangements may depend on further staff-level engagement, rulemaking, or the outcome of broader SEC reviews of digital asset custody standards.