SEC Approves Franklin Templeton Funds to Invest in Blockchain-Based BENJI

Franklin Templeton Secures SEC Approval for BENJI Investments

The U.S. Securities and Exchange Commission (SEC) has granted regulatory approval for Franklin Templeton’s registered mutual funds and exchange-traded funds (ETFs) to invest in the firm’s blockchain-based OnChain U.S. Government Money Fund, commonly referred to as BENJI. This decision follows the issuance of a no-action letter from the SEC’s investment management division regarding the fund’s custody structure.

Details of the SEC Decision

The SEC’s no-action letter allows mutual funds and ETFs to hold shares of BENJI without adhering to certain physical custody requirements. The fund, which currently has approximately $726 million in assets, primarily invests in U.S. government securities. The arrangement involves a unique custody structure that integrates blockchain records with Franklin Templeton’s traditional transfer agent system.

Blockchain Integration and Compliance

According to the SEC, the use of blockchain within the fund allows registered funds to manage cash without meeting some of the stipulations originally outlined in the Investment Company Act of 1940. The decision is grounded in the SEC’s recognition that the custody structure is sufficiently similar to the book-entry custody arrangements previously considered.

James Seyffart, an ETF analyst from Bloomberg, noted that the SEC’s ruling effectively opens avenues for Franklin’s investment products to directly engage with the blockchain-based fund, bypassing specific conventional compliance barriers.

Franklin’s Strategic Move with BENJI

Under the newly clarified structure, Franklin Templeton Investor Services will be responsible for creating blockchain wallets for the registered funds and will maintain control over the corresponding private keys. The affiliated transfer agent will also hold official shareholder records and manage administrative functions, including the rectification of any blockchain-related discrepancies.

Expansion of Institutional Uses

Franklin Templeton has been actively expanding the institutional applications of BENJI. Earlier this year, the firm integrated BENJI with MoonPay Trade, enabling institutional clients to trade stablecoins for shares of the fund. This platform’s launch facilitates treasury management as well as portfolio rebalancing functionalities.

Additionally, Franklin has been combining BENJI with other partnerships, including one with Payward, and has previously introduced off-exchange collateral options through a program initiated with Binance.

Future Prospects of BENJI

Since its inception, BYJI has demonstrated significant growth, with Franklin Templeton highlighting the importance of its blockchain infrastructure. Initially launched in 2021, BENJI has progressively expanded into multiple blockchain environments and continues to incorporate innovative mechanisms for managing its assets.

With the SEC’s recent approval, Franklin Templeton can now utilize BENJI more effectively within its suite of financial products, significantly enhancing its operational framework while maintaining regulatory standards.