Franklin Templeton discusses regulatory exemptions for tokenized funds with SEC

Franklin Templeton is in discussions with U.S. Securities and Exchange Commission (SEC) staff regarding regulatory exemptions required to trade tokenized money market funds (MMFs) and exchange-traded funds (ETFs) on blockchain-based liquidity pools.

According to SEC meeting memos, the asset manager is seeking clarity on whether existing regulations, such as Section 22(d) of the Investment Company Act and Rule 22c-1, which govern fund pricing and order processing, would require exemptions when tokenized MMF interests are traded against tokenized U.S. equities or stablecoins. The discussions also cover the legal classification of liquidity pools and whether the interests received by liquidity providers constitute securities.

The company is exploring ways to expand the utility of its BENJI token, which represents shares in its Franklin OnChain U.S. Government Money Fund. This includes investigating whether tokenized ETFs can be traded against other tokenized assets or permitted settlement stablecoins within non-traditional trading venues. These discussions follow the SEC’s September 2024 ‘Innovation Exemption,’ which allowed for the limited trading of tokenized U.S. equities on approved blockchain platforms.