The U.S. Securities and Exchange Commission’s Division of Investment Management said Wednesday that 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 funds can use Franklin OnChain U.S. Government Money Fund shares for cash management, including securities-lending collateral.
The change addresses a mismatch between the digital shares and Rule 17f-2 custody provisions designed for physical or certificated securities. SEC staff agreed not to enforce paragraphs (b), (e) and (f) of the rule for the arrangement if Franklin’s funds and transfer agent meet 12 conditions covering 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 its digital ownership record into vault-era procedures. Franklin told the SEC that the fund offers hourly net asset value calculations, intraday trading and faster transaction processing than its funds’ current cash-management vehicle.
FOBXX, whose blockchain-recorded shares are known as BENJI, had a total asset value of about $726.6 million as of Aug. 12, according to RWA.xyz. BENJI represents one share of the government money market fund.
