The SEC's Division of Investment Management issued a no-action letter to Franklin Templeton on August 12, 2026, clearing registered mutual funds and ETFs to hold shares of its on-chain money market fund and use them to manage cash, including collateral for securities lending. The move, first flagged by CoinDesk, lets the fund's blockchain-based records satisfy custody requirements that were written for paper certificates.
The fund at the center of the relief is the Franklin OnChain U.S. Government Money Fund, ticker FOBXX. It is a registered U.S. mutual fund that invests in Treasury securities, repurchase agreements, and cash, and it records share ownership through Franklin's BENJI system, where each token maps to one fund share. That system pairs internal book-entry data with a transaction record kept on the Stellar blockchain.
Closing the custody gap
Until now, a registered fund that wanted to hold shares of another fund had to fit that holding into custody rules built around physical securities and traditional intermediaries. FOBXX shares live on a blockchain ledger, so they did not map cleanly onto those requirements. The staff letter closes that gap. It says the SEC will not recommend enforcement action if funds custody and record FOBXX shares through Franklin's hybrid system rather than the legacy method.
The letter leans on Section 17(f) of the Investment Company Act and Rule 17f-2, the provisions that govern how registered funds may hold and safekeep their assets. The relief treats Franklin's arrangement as meeting those standards because a key control point stays traditional: Franklin's affiliated transfer agent keeps custody of the private keys, runs the administrative functions, and maintains the official shareholder record. The blockchain is the transaction log, not the sole source of truth.
That distinction matters. This is not a fund holding a bearer token in a self-custodied wallet. It is a regulated transfer agent operating a blockchain ledger under existing fund rules, with the on-chain record acting as a mirror of the internal book of ownership.
Cash management, not speculation
The practical use case is dull by design, which is the point. Money market funds are where large institutions park cash. Letting a registered fund hold FOBXX means that parked cash can sit in a tokenized instrument that settles faster and can be pledged as collateral in securities lending without leaving the blockchain rail.
According to reporting from The Block, the structure can support intraday trading, hourly net asset value calculations, and quicker transaction processing than the once-a-day pricing cycle that governs most money funds. For a treasury desk, faster settlement and hourly NAV are operational upgrades, not narrative ones. They shorten the window where cash is in transit and unavailable.
Franklin has been running FOBXX on public blockchains for years, so the fund itself is not new. What changed is the regulatory permission for other registered funds to treat its tokenized shares as an eligible, custody-compliant holding.
A template other issuers will copy
No-action letters are fact-specific and bind only the party that requested them. This one applies to Franklin Templeton and its BENJI setup. It does not automatically clear any other tokenized fund. But the staff's reasoning is now on the record, and it gives asset managers a concrete map of what an acceptable on-chain custody model looks like: a regulated transfer agent holding the keys, an official off-chain shareholder file, and the blockchain serving as a synchronized transaction ledger.
That is a meaningful signal for the broader tokenization push. Wall Street firms have been building tokenized versions of funds and Treasuries at pace, and the recurring obstacle has been custody and recordkeeping rules that predate blockchains. A letter that spells out a workable structure lowers the legal uncertainty for the next applicant.
The timing sits against a quiet crypto market. As of August 13, 2026, Bitcoin traded around $63,684 and Ether near $1,887, both roughly flat on the day, with the Fear and Greed Index reading 38, or "Fear." This story is a plumbing story, not a price story, and its weight is in the precedent rather than any immediate market reaction.
For consumers, the direct effect is nil. FOBXX is an institutional cash-management instrument, not a retail product, and it has no bearing on how a crypto card or wallet works today. The longer arc is what matters: the same tokenization rails that regulators are now blessing for fund custody are the rails that stablecoin and payment infrastructure increasingly run on.
Overview
The SEC's Division of Investment Management granted Franklin Templeton no-action relief on August 12, 2026, allowing registered mutual funds and ETFs to hold shares of its on-chain FOBXX money market fund and use them as cash and securities-lending collateral. The relief rests on Section 17(f) and Rule 17f-2, and it works because Franklin's affiliated transfer agent retains the private keys and the official shareholder record while the Stellar-based ledger tracks transactions. The letter binds only Franklin, but it publishes a custody blueprint the rest of the tokenization market can now follow.
