SEC approves Franklin Templeton Fund to directly hold BENJI tokenized assets

Franklin Templeton received SEC approval to allow its registered funds to directly hold tokenized money market fund BENJI

Franklin Templeton has received approval from the U.S. Securities and Exchange Commission (SEC) to allow its registered mutual funds and exchange-traded funds (ETFs) to directly hold its tokenized money market fund BENJI in their portfolios. This regulatory approval marks a major progress in integrating blockchain assets into mainstream investment vehicles of global asset management companies.

Regulatory approval removes custody barriers

The SEC's Department of Investment Management issued a no-objection letter under the Investment Company Act, specifically with regard to Section 17(f) and Rule 17f-2, which sets out the custody requirements of registered investment companies for assets. Previously, the rules required physical custody and manual manipulation of paper securities, creating obstacles for funds wishing to hold blockchain assets.

Franklin Templeton's framework proposes the use of digital wallets on the Stellar blockchain network. The company will control the private keys of these wallets, while official shareholder records and administrative responsibilities remain within its traditional transfer agency system. This setup meets regulators 'requirements that existing oversight mechanisms remain unchanged even if the custody model shifts from physical certificates to blockchain infrastructure.

This adjustment removes the main legal barrier that previously prevented Franklin Templeton Registered Fund from including BENJI in its official portfolio. Custody issues were previously identified as a major regulatory obstacle.

Tokenized money market funds combine blockchain with traditional regulation

BENJI, officially known as FOBXX, runs on the stellar blockchain but uses an existing bookkeeping system that runs parallel to traditional securities. Every transaction is recorded on a stellar chain for transparency and audit, while transfer agents maintain authoritative proof of ownership outside of the distributed ledger. This approach provides Franklin Templeton with multiple tools to resolve trading differences and protect shareholder interests when administrative errors or technical issues occur.

Regulators likened the new structure to historical bookkeeping systems that eliminated the need for paper certificates for certain securities. Commission staff also cited a 1992 decision involving Franklin Templeton as a precedent for recognizing digital records as valid under securities laws.

FOBXX combines blockchain infrastructure with traditional bookkeeping mechanisms rather than relying entirely on decentralized ledgers. Transaction data is recorded on the Stellar Network, while transfer agents maintain authoritative ownership records. This architecture provides Franklin Templeton with a variety of protections to handle trading differences or restore shareholder data.

Expand the use of blockchain in institutional finance

Franklin Templeton began providing BENJI on Stellar in 2021, and later expanded to networks such as Ethereum, Polygon, Avalanche, Arbitrum, Base, Aptos and Solana. This multi-chain approach expands accessibility while maintaining compliance and sound fund operations. The underlying assets of the BENJI Fund mainly include U.S. government securities, cash and repurchase agreements, and its conservative risk characteristics are suitable for a wide range of investors.

In addition to portfolio configuration, Franklin Templeton has also developed institutional application scenarios for BENJI, such as stablecoin deposit services, collateral management tools, and direct over-the-counter settlement solutions. The asset management company also allows qualified participants to make point-to-point BENJI transfers between registered blockchain addresses, further enhancing functionality.

Recent collaborations include integrations with digital asset platforms such as Binance, MoonPay and Payward, ensuring that BENJI can support a range of institutional workflows. However, the SEC's approval specifically authorizes the company to allow its own registered funds to hold BENJI, expanding the role of tokenized products in institutional cash management strategies.

As this shift progresses, traditional financial participants like Franklin Templeton are looking to use blockchain to improve efficiency, transparency and liquidity. While traditional markets rely on complex brokers, a major change is happening: Wall Street is migrating to Web3. Investors can now use relevant platforms to directly hold shares of major U.S. companies, gold and silver in their cryptocurrency wallets. By tokenizing real-world assets and automatically finding the best market price in seconds, these apps remove middlemen and simplify the transaction process.

Industry observers believe this regulatory milestone is likely to accelerate institutional adoption of tokenized assets in major financial markets.