SEC Staff Approves Franklin Funds' Use of Onchain Money Fund for Cash and Collateral

The U.S. Securities and Exchange Commission’s Division of Investment Management announced that it would not recommend enforcement action if Franklin Templeton’s U.S. registered funds hold shares of its onchain money market fund, FOBXX, via an affiliated blockchain-integrated custody and control system. This decision is subject to 12 specified custody and control conditions, marking a notable step towards integrating blockchain technology within regulated investment funds.

This development signifies a potential regulatory green light for the use of blockchain-based custody solutions in traditional investment vehicles, provided they meet certain safeguards. Franklin Templeton’s approach involves leveraging blockchain technology to facilitate the holding and management of cash and collateral, aligning with evolving regulatory standards.

The decision underscores a cautious but progressive stance from the SEC, balancing innovation with investor protection. It may influence other asset managers to explore blockchain-enabled fund structures, fostering broader adoption of digital asset infrastructure within regulated markets.