Franklin Templeton has received what it says is the first U.S. regulatory clearance allowing tokenized assets to be held inside conventional, registered investment funds. The SEC's Division of Investment Management issued a no-action letter on August 12 permitting Franklin's traditional mutual funds and ETFs to invest directly in the firm's blockchain-based Franklin OnChain U.S. Government Money Fund, known by its ticker FOBXX and token name BENJI, for cash management purposes.
BENJI has been running since 2021, originally launched on the Stellar network and now spanning nine different blockchains. The fund holds roughly $726 million in assets, invests primarily in U.S. government securities, and charges a 0.15% management fee — modest by traditional money-market standards, but notable for a fund whose share ownership is tracked on-chain rather than through conventional book-entry systems.
The regulatory mechanics matter here. The no-action letter carves BENJI's blockchain-based custody out of Rule 17f-2's physical-certificate requirements, a rule written for an era of paper securities that has historically complicated how registered funds can hold tokenized assets. Franklin Templeton Investor Services retains control of the fund's private keys as custodian and transfer agent, satisfying the SEC staff's concerns about safekeeping without requiring a vault full of paper certificates.
A template other fund giants can now point to
What makes the letter significant beyond Franklin's own funds is precedent. Any registered fund family that structures a similar request can now cite this letter, making it structurally harder for the SEC to deny an equivalent accommodation to a rival like BlackRock or Vanguard. BlackRock's own tokenized money-market vehicle, BUIDL, has already grown to roughly $2.4–2.7 billion in assets under management since its 2024 launch — evidence that institutional demand for tokenized cash products is already there, waiting on exactly this kind of regulatory plumbing to connect it to traditional fund structures.
Part of a broader tokenization wave
The move fits into a wider pattern of asset managers racing to build tokenized rails into legacy products, a trend that has also shown up in crypto-native form through protocols like Pendle's yield-tokenization markets, which apply a similar principle — turning a yield-bearing position into a separately tradable token — to DeFi rather than traditional fund structures. Franklin's approach and Coinbase's own newly opened Abu Dhabi tokenization hub both point toward the same conclusion: tokenized real-world assets are moving from pilot programs to infrastructure that regulators are actively building rules around.
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The SEC has stressed that the letter reflects staff views only and carries no formal legal force as a rule. Still, for an industry that has spent years asking regulators for exactly this kind of accommodation, a usable precedent — even an informal one — is likely to move faster than waiting on a rulemaking process to catch up.
