The staff of the U.S. Securities and Exchange Commission announced they will not recommend enforcement action against Franklin Templeton. This decision allows the asset manager’s U.S. registered funds to hold shares of its onchain money market fund through an affiliated blockchain system.
This relief resolves a regulatory mismatch between digital share records and existing custody rules designed for physical securities. Franklin Templeton must adhere to 12 strict conditions, including account segregation and independent verification, to ensure investor protection while using digital infrastructure.
Key facts
- The SEC staff issued a no-action letter on August 12, 2026, regarding Franklin Templeton’s custody arrangements.
- The arrangement is subject to 12 specific conditions covering transaction controls, reconciliation, and board oversight.
- The Stellar network serves as the primary ledger for these blockchain records, though other networks may be used upon request.
- Franklin OnChain U.S. Government Money Fund (FOBXX) held approximately $726.6 million in assets as of August 12, 2026.
- The exemption addresses conflicts with Rule 17f-2, which was originally written for physical security certificates rather than digital tokens.
- This position applies only to this specific affiliated custody system and does not establish a general legal precedent.
Why it matters
This development provides a clearer path for traditional investment funds to integrate blockchain technology into their operations. By adapting custody rules to accommodate digital shares, regulators are enabling asset managers to use efficient onchain systems without violating legacy securities regulations. This could encourage broader adoption of tokenized funds within the regulated financial sector.