SEC allows Franklin Templeton to use on-chain money market fund

The U.S. Securities and Exchange Commission (SEC) has issued a no-action letter to Franklin Templeton, allowing its registered funds to invest in the company’s blockchain-based money market fund, the Franklin OnChain U.S. Government Money Fund (FOBXX).

Under this guidance, fund managers can use the tokenized fund as a cash management tool without being required to adhere to certain existing physical-custody regulations. The SEC stated it will not recommend enforcement action provided specific conditions are met. These include maintaining systems to prevent unauthorized instructions and ensuring that the affiliated transfer agent, Franklin Templeton Investor Services (FTIS), maintains administrative controls to correct, freeze, migrate, or restore records.

The FOBXX fund invests at least 99.5% of its assets in U.S. government securities, cash, or repurchase agreements fully collateralized by U.S. government securities. While the fund aims to maintain a stable net asset value (NAV) of $1 per share, this is not guaranteed. This regulatory development follows Franklin Templeton’s expansion into the digital asset space, which includes the acquisition of crypto asset manager 250 Digital.