SEC Clears Path for Blockchain-Based Fund Custody The U.S. Securities and Exchange Commission has issued a no-action letter giving Franklin Templeton's registered funds the go-ahead to invest
The U.S. Securities and Exchange Commission has issued a no-action letter giving Franklin Templeton's registered funds the go-ahead to invest in its Franklin OnChain U.S. Government Money Fund, commonly known as BENJI. SEC staff said it would not recommend enforcement action against Franklin Templeton funds over a proposed custody arrangement involving shares of the Franklin OnChain U.S. Government Money Fund.
The decision allows Franklin Templeton Investor Services (FTIS) to act as custodian for participating funds without complying with certain requirements under Rule 17f-2 that were designed around physical or certificated securities. In practical terms, that removes a significant regulatory barrier that had previously complicated how blockchain-based fund shares could be held within traditional fund structures.
The OnChain Fund is a registered government money market fund whose official shareholder records are maintained through a system combining traditional internal records with blockchain technology.The blockchain portion records transactions including purchases, redemptions, dividend distributions, net asset values, and trade information, while FTIS maintains control over the official ownership record.
BENJI is the onchain share token of the Franklin OnChain U.S. Government Money Fund (FOBXX), a U.S.-registered mutual fund managed by Franklin Templeton.Each BENJI token represents one share of the fund, which invests in U.S. Treasury securities, repos, and cash. The fund targets a stable $1 share price.
The OnChain Fund currently uses the @StellarOrg blockchain as its primary public blockchain, although the SEC letter says other networks may be used for certain accounts subject to eligibility.For each investing fund, FTIS will create a separate blockchain wallet and retain control of the associated private key.
The relief comes with meaningful conditions. Each investing fund must maintain procedures designed to prevent unauthorized instructions, and FTIS must maintain administrative controls that allow it to correct unauthorized transactions, freeze or migrate wallet records, and restore the official ownership record when necessary.The funds' boards must approve the arrangements and review them at least annually.
Franklin Templeton's filing pointed to features of the OnChain Fund such as hourly net asset value calculations, intraday trading, and faster transaction processing as reasons for using the structure.As of Q1 2026, the fund holds roughly $828 million in assets under management and operates across eight public blockchains: Stellar, Polygon, Arbitrum, Aptos, Avalanche, Base, Solana, and Ethereum.
The fund is the first U.S.-registered fund to use a public blockchain to process transactions and record share ownership. Wednesday's SEC letter reinforces that position and may open the door for other asset managers to pursue similar structures.
Sources:Franklin Templeton receives SEC no-action letter for blockchain fund - Crypto BriefingFranklin Templeton Gets SEC Relief for Blockchain Fund Custody - Crypto TimesFranklin OnChain U.S. Government Money Fund surpasses $270M AUM - BusinessWire
