Franklin Templeton has secured staff-level relief from the U.S. Securities and Exchange Commission (SEC) enabling its registered funds to invest directly in its blockchain-based BENJI money market fund. The decision eliminates significant custody obstacles that had previously made direct holdings by mutual funds and ETFs difficult, allowing Franklin to integrate tokenized government money market funds more extensively across its conventional investment product lineup. The clearance comes as tokenized U.S. Treasury products gain traction among major asset managers, with BlackRock launching its own tokenized treasury fund BUIDL on Ethereum in March 2024 and other firms including Ondo Finance expanding similar offerings.

SEC Division of Investment Management Issues No-Action Relief

The SEC Division of Investment Management issued the no-action letter under the Investment Company Act. The relief applies to Section 17(f) and Rule 17f-2, which govern custody arrangements for registered investment companies. Under the clearance, Franklin funds may hold shares of FOBXX without complying with certain rules designed for physical securities—requirements centered on certificates, vault controls, and other physical custody safeguards. This marks one of the first instances where the SEC has formally accommodated direct tokenized asset holdings within the registered fund custody framework, potentially establishing a reference point for other asset managers pursuing similar structures.

FOBXX relies on digital records and blockchain transactions rather than physical certificates for ownership processing. The SEC accepted Franklin's proposed structure on the basis that traditional shareholder controls remain embedded in the system.

Franklin Templeton Investor Services will create Stellar wallets for registered funds investing in FOBXX and will control the associated private keys. Meanwhile, the affiliated transfer agent will continue maintaining official shareholder records and overseeing administrative functions.

BENJI Merges Blockchain Infrastructure With Traditional Book-Entry Controls

FOBXX employs blockchain technology alongside conventional book-entry systems rather than depending solely on distributed ledgers. Transaction data is recorded on the Stellar network, while the transfer agent retains the official ownership records. This dual-layer structure provides Franklin with multiple safeguards for correcting transaction errors or restoring shareholder data.

The SEC drew comparisons between this arrangement and earlier book-entry custody structures that functioned without physical securities. The agency also cited a 1992 no-action position involving Franklin when evaluating the current request. That earlier precedent helped underpin the regulatory treatment of securities represented through electronic records.

Franklin originally launched FOBXX on Stellar in 2021 as one of the first blockchain-based registered investment funds. BENJI tokens represent shares of the money market fund through blockchain infrastructure. The fund's portfolio consists primarily of U.S. government securities, cash, and repurchase agreements.

Franklin Broadens Institutional Applications for Tokenized Fund

Since the initial Stellar deployment, Franklin has expanded BENJI across multiple blockchain networks, including Ethereum, Polygon, Avalanche, Arbitrum, Base, Aptos, and Solana. These integrations broadened blockchain accessibility while preserving established fund administration and ownership controls.

The asset manager has also built out institutional use cases for BENJI beyond direct investment. Recent partnerships introduced stablecoin conversion, collateral functionality, treasury management, and off-exchange trading support. Franklin additionally enabled eligible holders to transfer BENJI shares directly between approved blockchain wallets.

Earlier collaborations linked BENJI with Binance, MoonPay, and Payward for institutional financial operations. The latest SEC decision, however, addresses a distinct application within Franklin's own registered investment products. The clearance now permits those funds to use FOBXX directly for regulated cash management within the existing custody framework. Whether other fund sponsors pursue comparable no-action relief for tokenized asset holdings remains an open question for the broader asset management industry.