SEC greenlights Franklin mutual funds and ETFs to invest in BENJI tokenized money fund
Franklin Templeton has secured a key regulatory milestone: the U.S. Securities and Exchange Commission has effectively signed off on allowing the firm’s traditional mutual funds and ETFs to invest in its blockchain-native OnChain U.S. Government Money Fund, commonly known by its ticker FOBXX and token symbol BENJI.
The SEC’s Division of Investment Management issued a no-action letter stating it would not recommend enforcement action if Franklin’s registered funds hold shares of FOBXX under a specific custody and record-keeping structure. The relief focuses on Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940, which were originally written for an era dominated by paper certificates and physical vaults, not blockchain tokens.
Instead of treating the blockchain as the sole “source of truth,” Franklin has adopted a hybrid record-keeping approach. The firm’s existing transfer-agent systems remain the official book of record, while blockchain transaction data functions as a parallel, technologically enhanced ledger. This integrated model lets Franklin’s mutual funds and ETFs gain exposure to a tokenized money market fund without having to comply with all of the legacy requirements associated with physical securities custody.
Under the structure approved by the SEC staff, Franklin Templeton Investor Services will establish blockchain wallets on behalf of the registered funds that invest in FOBXX and will control the associated private keys. At the same time, Franklin’s affiliated transfer agent will continue to maintain the authoritative shareholder register and retain responsibility for core administrative tasks.
This design gives the transfer agent the power to reverse or correct blockchain errors when necessary, ensuring that operational mishaps on the distributed ledger do not permanently compromise ownership records. In practice, internal book‑entry records and blockchain-based transaction history operate in tandem, with the transfer agent’s records remaining legally determinative.
FOBXX, which records token movements on the Stellar blockchain, embodies this dual-layer structure. While investors can benefit from the transparency and speed of onchain transactions, the fund itself still sits squarely within the regulatory framework applicable to traditional registered funds. The SEC concluded that Franklin’s model is analogous to book-entry custody arrangements it has previously evaluated, making it compatible with existing interpretations of Rule 17f‑2, even though no physical certificates are involved.
In coming to its position, the SEC staff pointed back to an earlier no-action letter from 1992 that also involved Franklin. That historical guidance provided a foundation for treating securities represented through book-entry systems-rather than paper certificates-as consistent with the Investment Company Act’s custody requirements. The new letter essentially extends that logic into the blockchain era, recognizing tokenized interests as functionally similar to dematerialized book-entry securities when supported by a robust transfer-agent framework.
For Franklin’s registered mutual funds and ETFs, this development has immediate practical implications. They can now use FOBXX as a cash-management tool-parking short-term cash in a U.S. government money market fund that exists onchain-without overhauling their operational processes to fit rules written around safes, vault inspections, and physical counts of certificates. Traditional risk controls and oversight remain in place, while the blockchain system handles transaction settlement and ownership transfers.
Industry observers have highlighted the move as a bridge between legacy investment products and digital-native infrastructure. Analysts describe the SEC’s position as opening a formal channel for conventional mutual funds and ETFs to obtain direct exposure to a blockchain-based fund structure, even though the underlying technology does not neatly align with the original text of the 1940 Act custody provisions. The no-action relief, in effect, updates the way those rules are applied without rewriting them.
Beyond the regulatory nuance, the decision significantly broadens BENJI’s institutional utility. For several years, Franklin Templeton has been building out use cases for its tokenized money market fund shares beyond the confines of standard fund accounts. With the no-action letter in place, BENJI is evolving from a proof-of-concept in tokenized finance into a component that can plug into mainstream portfolios and operational workflows.
In June, Franklin expanded BENJI’s reach by connecting it with MoonPay’s institutional trading infrastructure. That integration allows professional clients to swap major stablecoins such as USDC and USDT directly for shares of the onchain fund. The arrangement is designed for use cases like corporate treasury management, frequent portfolio rebalancing, collateral posting, and liquidity optimization-activities where near-instant settlement and blockchain transparency can be especially valuable.
MoonPay’s institutional platform offers onchain execution across a large number of blockchain networks through a single API, turning BENJI into a programmable money market exposure rather than a static position in a traditional account. For trading firms, hedge funds, and corporates that already operate across multiple digital asset venues, this makes a compliant, dollar-like yield instrument available inside the same onchain environment as their other positions.
Another important step came with Franklin’s collaboration with Payward, the parent company of crypto exchange Kraken. Under that partnership, BENJI is positioned to function as both collateral and a cash-management layer within Payward’s ecosystem. The two firms have also outlined plans to explore tokenized equities and additional onchain investment products, signaling a broader roadmap where regulated funds become integral building blocks of digital asset markets.
Earlier in the year, Franklin had already begun using BENJI as collateral in crypto-related contexts. Together with Binance, the asset manager launched an institutional program that enables eligible clients to pledge shares of the tokenized money market fund as off-exchange collateral. This setup allows institutions to keep assets in a regulated fund structure while still supporting trading activity, potentially reducing counterparty risk by limiting the funds they need to leave on a centralized exchange.
Taken together, these integrations show Franklin’s strategy: embed a regulated, U.S. government money market exposure into the core plumbing of digital finance. BENJI is not merely another token; it represents shares of a registered fund that must adhere to strict liquidity, credit quality, and diversification rules. Marrying that regulatory profile with programmable, onchain settlement turns the token into a kind of “yield-bearing cash Lego” for sophisticated users.
The SEC’s no-action letter is therefore more than a procedural footnote-it is a signal that U.S. regulators are willing to accommodate tokenized fund structures, provided they sit atop familiar control frameworks. By allowing mutual funds and ETFs to own shares of FOBXX, the SEC is acknowledging that blockchain-based record-keeping can coexist with, and be subordinated to, traditional transfer-agent systems without undermining investor protection.
For investors, the potential benefits are both operational and strategic. On the operational side, settlement times can be shortened, reconciliation can become more automated, and transparency into transactions can improve. On the strategic side, asset managers get new tools for cash management, collateral optimization, and onchain liquidity provisioning, while still operating within the risk parameters of a regulated money market fund invested in U.S. government instruments.
The hybrid model also addresses one of the biggest concerns institutions have about digital assets: control over private keys and the irreversibility of blockchain errors. By centralizing key management with the transfer agent and maintaining an authoritative, offchain shareholder register, Franklin can correct mistakes, reverse misdirected transfers in appropriate circumstances, and ensure corporate actions are properly reflected, all while using the blockchain’s audit trail as an additional layer of verification.
From a broader market perspective, Franklin Templeton’s progress with BENJI offers a template for other asset managers considering tokenization. Rather than replacing existing infrastructure, the approach layers blockchain technology on top of established processes for custody, transfer agency, and compliance. This reduces technological and regulatory friction for institutional investors, who can access tokenized products through their usual fund channels rather than having to build entirely new workflows.
The move also illustrates how tokenization can start with relatively low-risk asset classes. Government money market funds are among the most conservative investment vehicles available. By tokenizing this type of exposure, Franklin can test and scale blockchain-based operations in a setting where credit and duration risks are tightly controlled, focusing innovation on plumbing and process rather than on speculative assets.
As more institutional portfolios experiment with onchain components, interoperability and standardization will become increasingly important. BENJI’s integrations with trading and infrastructure providers suggest a future in which tokenized funds interact seamlessly with stablecoins, tokenized Treasuries, lending protocols, and other digital asset instruments. The SEC’s willingness to permit conventional funds to hold such instruments is an early step toward that more interconnected environment.
In practical terms, the new regulatory clearance means Franklin’s own lineup of mutual funds and ETFs can now treat BENJI not just as a separate, experimental product, but as a building block within their existing strategies. Over time, that could translate into more efficient cash management, new share classes, or strategies that explicitly leverage onchain settlement to reduce friction and cost.
Franklin Templeton’s continued expansion of its crypto and blockchain initiatives underscores a broader shift in how major asset managers view digital infrastructure. Rather than standing apart from traditional finance, blockchain is increasingly being woven into the architecture of regulated products. With the SEC’s no-action letter in hand, BENJI stands at the center of that effort, bridging the gap between the 1940 Act world and the emerging onchain economy.