Franklin Templeton has secured SEC staff relief that gives participating registered funds greater flexibility to use its blockchain-recorded money market fund, FOBXX, for cash-management purposes. The arrangement allows eligible Franklin Templeton funds to invest cash balances and securities-lending collateral in the on-chain fund under a specifically defined custody structure, extending tokenization deeper into conventional fund operations.
The development is not a broad regulatory approval for tokenized collateral. Instead, the SEC Division of Investment Management issued a no-action position on August 12 under Section 17(f) and Rule 17f-2 of the Investment Company Act. The relief applies to Franklin Templeton’s proposed arrangement and depends on detailed controls governing custody, wallets, records and oversight.
SEC relief focuses on blockchain-based custody
In the SEC’s official no-action response, staff said it would not recommend enforcement action if Franklin Templeton Investor Services acts as custodian for participating funds’ FOBXX shares without complying with several Rule 17f-2 provisions designed around physical securities. The decision effectively adapts existing custody requirements to a fund whose ownership records incorporate blockchain technology.
FOBXX remains a traditional registered government money market fund despite its on-chain recordkeeping. Franklin Templeton’s official fund information says at least 99.5% of assets are invested in U.S. government securities, cash and fully collateralized repurchase agreements. Blockchain technology changes how ownership and transactions are recorded, not the underlying investment mandate of the fund.
The SEC arrangement requires separate blockchain wallets for participating funds, authentication controls, segregated records, transaction confirmations, board approval and recurring independent-accountant verification. Franklin Templeton’s transfer agent must also retain administrative capabilities to correct unauthorized transactions, freeze or migrate wallet records and restore ownership records when necessary. Those safeguards show that the regulatory accommodation rests heavily on institutional control over the blockchain-based recordkeeping system.
Tokenized cash moves deeper into institutional workflows
The relief complements Franklin Templeton’s broader effort to make tokenized money funds usable beyond passive ownership. Its earlier institutional collateral program with Binance allows eligible clients to pledge Benji-issued money market fund shares as off-exchange collateral while the assets remain in regulated custody. That separate program illustrates how tokenized fund shares are increasingly being connected to trading, collateral and treasury-management workflows.
The regulatory significance remains incremental rather than universal. The SEC staff position does not rewrite custody rules for every tokenized fund, nor does it represent blanket approval of blockchain-based collateral arrangements. What it provides is a concrete path for one regulated fund structure to integrate on-chain recordkeeping with familiar cash-management and securities-lending processes.
That procedural progress may be the more meaningful signal. FOBXX is moving from demonstrating that fund ownership can be recorded on-chain toward showing how those shares can function inside established financial operations, while remaining subject to the controls expected of registered investment companies.