SEC Staff Grants Franklin Templeton No-Action Relief to Use Tokenized Fund Shares in Traditional Funds

Franklin Templeton has received SEC staff no-action relief that clears the way for tokenized fund shares to be used within traditional investment fund structures. The relief covers the Franklin OnChain U.S. Government Money Fund, a blockchain-based money market fund with about $720.9 million in net assets as of July 31 (roughly $721 million). Bloomberg reported that the staff position would allow the fund's shares to be held as collateral inside conventional ETFs and mutual funds, a step that could bring blockchain-recorded assets further into mainstream investment products. The SEC's Division of Investment Management issued the no-action position to Franklin Templeton Investor Services, permitting it to administer fund shares recorded on a blockchain. The fund operates on the Stellar blockchain and posted a 3.50% seven-day net yield. The SEC staff emphasized that the letter is not a formal rulemaking or commission approval and carries no legal force, though it provides regulatory clarity for the proposed structure. Under the framework, Franklin Templeton will establish separate Stellar wallets for each investment fund, keep the official books and records of ownership, and retain administrative control over the wallets. The staff relief comes with 12 conditions aimed at investor protection and operational safeguards. Fund boards must approve the arrangement and review it annually. Franklin Templeton Investor Services must be able to correct errors, freeze records, migrate wallet information, and restore ownership data when required. Independent public accountants must also verify fund holdings multiple times each fiscal year. The authorization also permits use of these shares for cash balances and as collateral in securities lending, broadening potential use cases for tokenized investment products. Disclaimer: This content is for informational purposes only and does not constitute financial advice. CoinCryptoNewz is not responsible for any losses incurred. Readers should conduct their own research before making financial decisions.