The SEC staff has given Franklin Templeton a narrow but meaningful green light to let its registered funds invest in the firm’s tokenized money market fund, FOBXX, under a custody structure built for blockchain rails and old-school compliance at the same time.
- No-action relief under custody rules written for a paper-era market
- FOBXX/BENJI can be held through Franklin’s proposed structure
- Transfer-agent controls remain the legal anchor
- Tokenized funds keep gaining institutional traction
- Not a blanket approval, just staff-level relief for a specific setup
The SEC’s Division of Investment Management posted a no-action letter on Wednesday saying it would not recommend enforcement under Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940 if Franklin uses the arrangement it proposed for the OnChain U.S. Government Money Fund, known by the ticker FOBXX and branded around BENJI.
For anyone not steeped in fund law, those custody rules were built around physical securities, vaults, and a world where ownership was tracked on paper or in tightly controlled ledgers. They were not written with wallet addresses, private keys, and blockchain transaction records in mind. Franklin’s setup tries to bridge that gap without pretending the blockchain gets to be the sole source of truth.
Bloomberg ETF analyst James Seyffart put the practical effect bluntly on X:
“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, ”
That is directionally right, but the scope matters. This is not a broad SEC blessing for every tokenized fund under the sun. It is staff-level relief for Franklin’s described structure, with the transfer agent still firmly in charge of the official records.
What Franklin actually got
The no-action letter covers Franklin’s proposed arrangement for registered funds that want exposure to FOBXX. Under that structure, Franklin Templeton Investor Services will create blockchain wallets for the investing funds and retain control of the corresponding private keys.
That is the part that keeps this inside the regulatory guardrails. The transfer agent maintains the official shareholder record and handles the administrative functions tied to ownership. In plain English: the blockchain is part of the recordkeeping stack, but it is not the legal boss of the books.
The SEC letter also says the transfer agent can correct blockchain-related errors and restore records when needed. That is exactly the kind of control regulators want when money, compliance, and operational risk are all sitting in the same room.
Franklin’s setup uses an integrated record-keeping model, with internal book-entry records operating alongside blockchain transaction data maintained on Stellar. The SEC also cited a 1992 no-action letter involving Franklin as precedent, which suggests the staff viewed this less like a crypto exception and more like an updated version of an existing fund-admin framework.
Why it matters
Franklin launched FOBXX on Stellar in 2021, and the fund is invested primarily in U.S. government securities while seeking to hold a stable $1 share price. In other words, it is a cash-management instrument first and a blockchain product second.
That is exactly why tokenized money market funds have become one of the cleaner institutional use cases in crypto. They let asset managers and treasuries keep a conservative, regulated wrapper while moving value over faster, more programmable rails. Not sexy, but very useful. Finance has always had a deep and embarrassing love affair with boring stuff that works.
Franklin has also pushed this product across multiple chains. In February 2025, it added FOBXX to Solana. Earlier deployments included Aptos, Ethereum, Avalanche, Arbitrum, Base and Polygon. When the Solana deployment was announced, at least 99.5% of the fund’s assets were invested in U.S. government securities, cash, and repurchase agreements.
According to RWA.xyz data cited in the materials, FOBXX had roughly $726 million in assets under management. That is not meme-coin theatrics. That is real institutional plumbing with real money behind it.
The legal nuance that matters
This is where the hype needs to calm down a bit. The SEC did not rewrite custody law, and it did not hand tokenized funds a universal pass. It issued a no-action letter, which means staff will not recommend enforcement if Franklin follows the described arrangement.
That is helpful, but it is not the same thing as a rule change. It is fact-specific, conditional, and built around a structure where the transfer agent still controls the official shareholder record and the administrative machinery around it.
The key legal idea is simple: if the transfer agent remains in charge of the books, and the blockchain is folded into a controlled recordkeeping system, then the custody framework can work here, at least for this setup. That may disappoint the “fully decentralized or bust” crowd, but regulators are not in the business of handing the keys to a smart contract and wishing everyone good luck.
Franklin has been building this for years
This did not appear out of nowhere. Franklin has been expanding the product and its distribution channels for a while now.
In April 2023, when FOBXX was extended to Polygon, it had more than $270 million under management. In April 2024, Franklin enabled peer-to-peer transfers of fund shares on Stellar and Polygon, when the fund had about $380 million in assets.
That growth matters because it shows the product is becoming more operationally mature, not just more loudly marketed.
In June, Franklin added BENJI to MoonPay Trade, letting institutional clients exchange stablecoins including USDC and USDT for fund shares. A separate integration announced in May brought BENJI into Payward, the parent company of Kraken.
In February, Franklin and Binance launched an institutional program that allows eligible clients to pledge tokenized money market fund shares as off-exchange collateral, meaning collateral posted outside the exchange’s own orderbook and custody stack. That is one of the clearest signals of where tokenized funds are actually useful: treasury, liquidity, collateral, and settlement.
Franklin has also been expanding its digital asset business more broadly. The firm completed its acquisition of 250 Digital in June and formed Franklin Crypto. At the time, Franklin managed about $1.78 trillion in assets worldwide. RWA.xyz data cited in the materials put Franklin Templeton’s total tokenized assets at more than $2.5 billion, up from roughly $768 million a year earlier.
What this says about tokenization
Tokenized funds keep attracting attention because they offer something both crypto-native and deeply traditional: a regulated asset moving over programmable rails. That is the real story here, not some grand declaration that old finance has been overthrown.
The more interesting point is the compromise. This structure still depends on compliance, transfer agents, and legal controls that look very familiar to TradFi. The blockchain is useful, but it is not sovereign. In this case, centralization is not a bug; it is the feature that makes regulators and institutions willing to touch the thing.
That also means the upside comes with a tradeoff. A model like this can scale tokenized finance inside the system, but it also reinforces permissioned infrastructure and the same gatekeepers crypto was supposed to route around. Progress, yes. Revolution, no. The revolution is still waiting in line at compliance.
Key questions and takeaways
-
Did the SEC formally approve Franklin’s tokenized fund setup?
No. The SEC staff issued a no-action letter, which means it will not recommend enforcement under the described conditions. That is useful relief, but it is not a new rule or a blanket approval. -
What is FOBXX?
FOBXX is Franklin Templeton’s OnChain U.S. Government Money Fund. It is a tokenized money market fund that invests primarily in U.S. government securities and seeks to keep a stable $1 share price. -
Why does this matter for crypto and blockchain?
It shows that tokenized assets can fit inside regulated fund structures when the transfer agent keeps control of the official records. That is a meaningful step for institutional adoption of blockchain rails. -
Does this replace traditional custody?
No. Franklin’s model uses blockchain alongside internal book-entry records, while the transfer agent keeps the official shareholder record and private key control. The old custody framework is still doing the heavy lifting. -
Is this mainly useful for retail investors?
Not really. The strongest use cases are institutional, treasury management, collateral, liquidity, and settlement. Retail exposure may come indirectly, but this is built for serious capital, not degenerate chart-watching. -
Does this change SEC policy broadly?
No. This is staff-level relief tied to a specific Franklin structure. Other issuers would still need to make their own case if they want similar treatment.
Further reading
A few related pieces on Franklin, BENJI, and the wider tokenized-fund grindset:
- SEC clears Franklin mutual funds and ETFs to invest in BENJI
- Franklin Templeton’s Global Investment Strategies
- SEC Clears Franklin Templeton Funds to Hold BENJI Shares
- SEC Clears Franklin Templeton’s On-Chain Money Fund
- JPMorgan Launches Tokenized Money Market Fund on Ethereum
- Kraken and Franklin Templeton Expand Tokenized Assets Push
