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FollowingSEC waivers Franklin Templeton funds to use on-chain funds for cash management and loan collateral
The Investment Management Division of the U.S. Securities and Exchange Commission (SEC) issued a no-objection relief letter to Franklin Templeton on August 12, 2026. The decision allowed Franklin's registered funds to use their "OnChain U.S. Government Money Fund" for cash management and securities lending collateral. This exemption covers blockchain custody and ownership records, replacing some of the physical security requirements under Rule 17f-2.
SEC exemption covers blockchain custody
exemption covers Article 17(f) and paragraphs (b),(e), and (f) of Rule 17f-2. Franklin's funds can hold shares of chain funds through Franklin Templeton Investor Services LLC (FTIS). FTIS acts as transfer agent and maintains official ownership records.
The system combines an internal ledger registry database with blockchain records covering purchases, redemptions, dividends, net asset value (NAV) and transaction dates. FTIS correlates these records in real time to generate a file of the host person. At the same time, FTIS controls blockchain permissions, smart contracts and management functions related to ownership records.
Each fund will use separate blockchain wallets
FTIS will create separate Stellar blockchain wallets for each investment fund and keep the private keys of these wallets. The wallet system adopts multi-signature, multi-party computing, distributed signature and offline recovery measures.
However, FTIS retains control of official ownership records. Its administrative rights allow you to correct errors, freeze wallets, migrate records, or restore ownership information. The arrangement will support cash balances and securities borrowing collateral. Franklin Templeton pointed out that this move can achieve hourly net worth updates, intraday trading and faster processing speeds.
The SEC sets conditions for fund supervision
SEC staff require each fund to maintain control over authorization orders and transaction reviews. FTIS must provide transaction confirmations and maintain separate records for each fund.
The arrangement must be approved by the board of directors of each fund and reviewed annually. FTIS also needs to hand over recording and management control to its successor. Independent public accountants must reconcile FTIS records with fund records and conduct investment verifications at least three times per fiscal year.
At least two of these inspections need to be carried out without prior notice. The fund must also resolve discrepancies discovered during the verification process. SEC staff said the letter only involved enforcement actions and did not amend existing laws or create new legal obligations.
