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SEC staff won’t seek enforcement over Franklin onchain cash custody
The SEC relief allows Franklin Templeton’s U.S. registered funds to use shares of its onchain money market fund, FOBXX, as cash management and securities-lending collateral under 12 custody and control conditions.
The U.S. Securities and Exchange Commission’s Division of Investment Management said Wednesday it would not recommend enforcement action if Franklin Templeton’s U.S. registered funds hold shares of its onchain money market fund through an affiliated blockchain-integrated custody and recordkeeping system.
The arrangement is designed to address a mismatch between the digital form of the shares and Rule 17f-2 custody provisions built for physical or certificated securities. Under the SEC staff’s non enforcement view, Franklin’s funds can use Franklin OnChain U.S. Government Money Fund shares for cash management, including securities-lending collateral, if the funds and their transfer agent meet 12 conditions covering items such as account segregation, transaction controls, reconciliation, board oversight, and independent verification.
For Franklin’s registered funds, the practical effect is access to FOBXX as an internal cash vehicle without forcing the digital ownership record into vault-era procedures. Franklin told the SEC the onchain fund offers hourly net asset value calculations, intraday trading, and faster transaction processing than its current cash-management option.
FOBXX, which is represented by blockchain-recorded shares called BENJI, had total assets of about $726.6 million as of Aug. 12, according to RWA.xyz. The SEC letter says Franklin Templeton Investor Services maintains the official ownership record through an internal book-entry system linked in real time to blockchain networks, with Stellar described as the primary network.