Summary
- The SEC cleared Franklin Templeton’s registered funds to invest in BENJI without meeting certain physical custody requirements under existing regulations.
- Franklin’s hybrid system combines blockchain records with internal book entries while its transfer agent controls private keys and shareholder records.
- BENJI operates across Stellar, Ethereum, and Solana, manages about $726 million, and primarily invests in United States government securities.
The U.S. SEC has cleared Franklin Templeton’s registered funds to invest in its blockchain-based OnChain U.S. Government Money Fund. The regulatory relief gives Franklin’s mutual funds and ETFs another option for managing cash through its tokenized fund infrastructure.
According to the SEC’s letter, the SEC’s Division of Investment Management provided clearance through a no-action letter addressing Section 17(f) and Rule 17f-2 custody requirements. Franklin’s registered funds can now hold FOBXX shares without meeting certain physical securities and vault requirements, consequently accessing BENJI’s blockchain-supported transaction and record-keeping system.
Bloomberg analyst James Seyffart said the decision effectively allows Franklin’s registered funds to hold its OnChain fund. He explained on X that existing 1940 Act custody rules had created a technical obstacle for such holdings.
Additionally, BENJI offers operational features including faster transaction processing and more frequent pricing updates. Franklin can now make those capabilities available for cash management across eligible registered funds.
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SEC Backs Franklin’s Hybrid Blockchain Record-Keeping Model
Franklin’s record-keeping structure played an important role in securing the regulatory relief. The system combines internal book-entry information with transaction records maintained through blockchain infrastructure.
Stellar supports the blockchain component of that system. However, Franklin’s affiliated transfer agent retains control over private keys, administrative functions, and the official shareholder records.
Moreover, Franklin Templeton Investor Services will create and control Stellar wallets used by participating registered funds. It will also maintain custody of the private keys associated with those wallets.
This structure allows Franklin to correct errors or restore records when necessary. Therefore, blockchain transactions do not replace the transfer agent’s authority over the official ownership records.
The SEC considered this arrangement sufficiently similar to traditional book-entry systems previously accepted under existing securities regulations. Regulators also referenced a 1992 Franklin no-action letter in support of their latest position.
BENJI Expands Across Multiple Blockchain Networks
As a result, participating funds will avoid specific Rule 17f-2 requirements involving physical certificates and vault arrangements. However, Franklin retains responsibility for maintaining control over the underlying shareholder records and wallet infrastructure.
Franklin launched BENJI on Stellar in 2021, later expanded to Ethereum and Solana, and primarily invests in U.S. government securities while targeting a stable $1 share price. BENJI currently manages approximately $726 million in assets based on figures provided in the reference, with most of those assets remaining on Stellar.
The SEC clearance strengthens the connection between Franklin’s conventional registered funds and its blockchain-based money market product. It removes specific custody barriers while preserving established controls over shareholder ownership and fund administration.
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