SEC Clears Franklin Templeton to Use On-Chain U.S. Money Fund
SEC issued a no-action letter allowing Franklin Templeton to invest cash in the Franklin OnChain U.S. Government Money Fund and let its transfer agent hold the fund’s private keys under 12 conditions.
The Securities and Exchange Commission issued a no-action letter Wednesday allowing Franklin Templeton to invest cash from its funds in the Franklin OnChain U.S. Government Money Fund and permitting its affiliated transfer agent to hold the fund’s private cryptographic keys under 12 conditions.
The Franklin OnChain U.S. Government Money Fund is a tokenized, interest-bearing money market fund that invests in U.S. government securities and seeks to maintain a stable $1 share price. Franklin Templeton filed a formal no-action request before seeking to place cash into the on-chain vehicle.
The SEC’s letter states the agency will not recommend enforcement action if Franklin Templeton’s fund managers invest cash in the on-chain fund and if the firm complies with the 12 conditions outlined in the letter. The letter also allows Franklin Templeton Investor Services, the firm’s transfer agent, to act as custodian for the tokenized fund and to hold the private keys without following the agency’s physical-custody rules.
Among the conditions, the SEC requires systems that block unauthorized instructions to the on-chain fund and operational controls to protect transaction integrity. The transfer agent must maintain administrative controls that allow it to correct, freeze, migrate or restore token records, and to respond to operational errors or security incidents affecting tokenized records.
The letter does not change the broader securities laws or the SEC’s custody rules for other arrangements. It specifies procedural and security requirements that Franklin Templeton must meet before moving cash into the tokenized fund.
Franklin Templeton has been expanding into tokenization. The firm oversees roughly $2.5 billion in on-chain assets across its tokenized funds, according to market-data firm RWA.xyz. In June it launched a dedicated crypto division and acquired 250 Digital, a crypto asset manager.
The SEC’s response outlines how a regulated fund and its transfer agent can operate tokenized fund records on a blockchain when the required safeguards and administrative capabilities are in place. Compliance with the 12 conditions is required to avoid enforcement.
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