Franklin Templeton Explores SEC Relief for Tokenized Fund Trades
RWA Signal Insight
U.S. TreasuriesFranklin Templeton met with SEC Crypto Task Force staff on October 9 to discuss potential regulatory exemptions for trading tokenized money market funds and ETFs on blockchain venues. The investment manager, which oversees $1.79 trillion in assets, is seeking clarity on whether blockchain-based fund shares can be exchanged for tokenized National Market System (NMS) stocks. Central to the discussion are Investment Company Act rules 22(d) and 22c-1, which mandate specific pricing and valuation procedures for redeemable fund shares. Franklin Templeton is exploring if these rules require exemptions to facilitate trading pairs involving tokenized stocks, stablecoins, and money market funds. The firm also questioned whether liquidity pools used for these trades require registration as investment companies under the 1940 Act. This engagement follows the SEC's September 17 innovation exemption, which allows limited tokenized stock trading under strict conditions. These discussions represent a significant step toward integrating traditional fund operations with decentralized liquidity infrastructure. If successful, this could establish a legal framework for seamless, on-chain trading of regulated financial products.
Key points
- Franklin Templeton met SEC staff to discuss trading tokenized funds on blockchain venues.
- The firm seeks exemptions from Investment Company Act rules regarding pricing and valuation.
- Discussions included potential trading pairs between tokenized ETFs, NMS stocks, and stablecoins.
- The inquiry addresses whether liquidity pools require registration as investment companies.
Background
Franklin Templeton operates the Franklin Onchain U.S. Government Money Fund (FOBXX), which uses the Benji platform to record share ownership via BENJI tokens. The fund allows investors to hold government money market exposure on-chain, facilitating peer-to-peer transfers and automated dividend distributions. It serves as a primary example of institutional-grade RWA tokenization within the U.S. regulatory perimeter.