SEC Clears Franklin Templeton Funds to Invest in Blockchain-Based BENJI Money Market Fund

Highlights:

• Franklin Templeton can now use its BENJI fund for cash management after the SEC issued a no-action letter.
• The decision lets registered funds use BENJI without following certain custody rules for physical securities.
• BENJI combines blockchain technology with traditional recordkeeping to support faster transactions and hourly pricing updates.

The U.S. Securities and Exchange Commission’s Division of Investment Management issued a no-action letter on Wednesday allowing Franklin Templeton’s registered funds to invest in the Franklin OnChain U.S. Government Money Fund. The decision allows the firm’s mutual funds and exchange-traded funds to use the blockchain-based fund for cash management and securities lending collateral. It also removes custody barriers that previously prevented the funds from holding BENJI shares under existing rules.

Franklin Templeton Gets SEC Green Light To Expand Stellar Based Fund Access

The SEC issued a no action letter allowing Franklin Templeton’s registered funds to invest in its OnChain U.S. Government Money Fund.

Per reports, the decision removes certain custody hurdles under the… pic.twitter.com/YdHoisrpua

— BSCN (@BSCNews) August 13, 2026

The SEC based the no-action letter on Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940, which govern custody requirements for registered investment funds. Congress designed those custody rules for physical securities rather than blockchain-based ownership records.

The SEC staff said it would not recommend enforcement action if Franklin Templeton follows its proposed blockchain custody arrangement and meets all required safeguards. Therefore, Franklin Templeton’s registered funds can hold BENJI shares without following certain Rule 17f-2 custody requirements written for physical securities.

Bloomberg ETF analyst James Seyffart said the SEC’s decision allows Franklin Templeton’s registered funds to use BENJI despite its blockchain-based custody structure. He added that the relief allows Franklin Templeton’s mutual funds and exchange-traded funds to hold BENJI shares without meeting custody rules written for physical securities.

NEW: @FTI_US just got a no action letter from the SEC relating to their OnChain government money market fund. Essentially it opens the door for Franklin’s registered funds (mutual funds, ETFs etc) to hold its OnChain fund despite not technically satisfying 1940 act custody rules pic.twitter.com/3KyzJBcyid

— James Seyffart (@JSeyff) August 12, 2026

The SEC said the no-action letter reflects only the Division of Investment Management staff’s enforcement position and does not create a new rule or regulation. The agency also said the letter does not represent formal approval of Franklin Templeton’s custody framework.

Franklin Templeton Advances Onchain Custody After SEC Clears New Structure

The company operates BENJI through a hybrid recordkeeping system that combines internal transfer-agent records with blockchain transaction records. Franklin Templeton Investor Services maintains the official shareholder records while the Stellar blockchain records fund transactions and ownership activity.

The Stellar blockchain records purchases, redemptions, dividend distributions, hourly net asset values, and other transaction information for BENJI. Meanwhile, Franklin Templeton Investor Services maintains the official shareholder register, controls every private key, and manages all administrative functions.

Franklin Templeton Investor Services creates a separate Stellar wallet for every participating fund and retains full administrative control over each wallet. The company can also correct unauthorized transactions through its administrative controls. It can restore records, freeze wallets, migrate records, and preserve the official ownership history whenever necessary.

The SEC granted the relief only after requiring Franklin Templeton to meet several custody and oversight conditions. Franklin Templeton must maintain separate wallets and segregated accounts for every participating fund. The company must also complete daily transaction reconciliations and apply authentication controls before processing instructions.

BENJI Expands Cash Management Options for Registered Portfolios

The SEC’s decision allows Franklin Templeton’s registered funds to use BENJI’s blockchain infrastructure for faster cash management operations. Franklin Templeton said BENJI provides hourly net asset value calculations, intraday trading, and faster transaction processing for participating funds.

BENJI invests at least 99.5% of its assets in U.S. government securities, cash, and fully collateralized repurchase agreements under its investment strategy. The fund also aims to maintain a stable net asset value of one dollar per share. Each BENJI token represents one share of the Franklin OnChain U.S. Government Money Fund, also known as FOBXX.

The SEC’s decision follows Franklin Templeton’s recent expansion into tokenized financial products. Earlier this year, Payward, the parent company of Kraken, partnered with Franklin Templeton to expand tokenized assets and institutional digital finance services. The companies said the partnership will bring more traditional financial products onchain and make them easier to use across digital asset markets.