Franklin Templeton is preparing an arrangement that would let the exchange-traded funds (ETFs) and mutual funds it manages use a tokenized money market fund for cash management purposes, Bloomberg Law reported on August 20 local time. The fund in question, the Franklin OnChain U.S. Government Money Fund (brand name Benji, BENJI), is a registered money market fund that invests in short-term assets such as U.S. Treasuries and records investor holdings on a blockchain. Citing data compiled by RWA.xyz, The Block reported net assets of about $726 million as of August 12, most of it on the Stellar network. On August 12, staff of the U.S. Securities and Exchange Commission's (SEC) Division of Investment Management issued a no-action position stating that they would not recommend enforcement action if the funds involved follow 12 control conditions in place of the existing procedures for physical custody, recordkeeping, and verification. This is the position of SEC staff on a specific set of facts, not an approval by the Commission or a general rule. The conditions include separation of accounts and wallets by fund, board approval and annual review, authentication of authorized persons, daily reconciliation of transaction confirmation records against approved instructions, and at least three independent verifications per year, of which at least two must be conducted without prior notice. Franklin Templeton Investor Services (FTIS), the transfer agent that maintains the register of investor holdings, manages the official ownership records, the correction of errors and unauthorized transactions, and the freezing and transfer of wallet records, and if the agent changes, it must hand the necessary administrative authority to its successor. That said, as of the August 20 report, no ETFs or mutual funds that have actually completed the arrangement, nor the amounts involved, had been disclosed, so this should be viewed as a preparatory stage.
Franklin Templeton Prepares to Add Tokenized Fund to the ETFs and Mutual Funds It Manages
Metanomia View
Once tokenized assets enter the cash management and collateral of traditional funds, on-chain finance is no longer a separate market but an extension into the operating layer of existing capital markets. At the same time, the official ledger, wallet authority, and the power to correct records and freeze them remain with the transfer agent, and the design provides for the administrative authority needed to maintain the official records to pass to a successor transfer agent. Korea's tokenized fund framework, too, needs to settle first which record is the legal original, who corrects errors, and who controls collateral, rather than whether a blockchain is used. Whether actual inclusion and collateral use begin is something that needs to be confirmed separately.