The Securities and Exchange Commission’s (SEC), Division of Investment Management has issued a no-action letter on August 12, 2026, allowing Franklin Templeton’s registered funds to invest in the firm’s own blockchain-based money market fund for cash management purposes.
The letter addresses custody arrangements under Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940.
It states that staff would not recommend enforcement action if Franklin Templeton’s US open-end and closed-end funds hold shares of the Franklin OnChain US Government Money Fund (ticker FOBXX) without complying with certain paragraphs of Rule 17f-2.
Those provisions were designed primarily for physical or certificated securities held in vaults and involve specific segregation, notation, and verification requirements that do not neatly map onto digital share records.
The OnChain Fund, whose shares are recorded on blockchain networks and commonly known by the BENJI designation, operates as a government money market fund under Rule 2a-7.
It invests at least 99.5 percent of assets in US government securities, cash, and fully collateralized repurchase agreements, aiming to maintain a stable $1 net asset value.
Launched in 2021, it was the first US-registered mutual fund to use a public blockchain as part of its official system of record for processing transactions and recording ownership.
The Benji Technology Platform, Franklin’s infrastructure, integrates an internal book-entry system with blockchain records.
Franklin Templeton Investor Services (FTIS), an affiliated transfer agent, maintains full control over the official shareholder records, including the ability to correct errors, freeze or migrate wallets, and restore accurate ownership information.
Under the approved structure, FTIS creates and secures dedicated blockchain wallets (primarily on the Stellar network, with potential use of others) for the investing funds and holds the associated private keys using layered security measures such as multi-signature and multi-party computation techniques.
Franklin Templeton has indicated that the OnChain Fund offers operational benefits not available in its conventional cash vehicles, including hourly net asset value calculations, intraday trading capability, faster transaction processing, potential cost reductions, and enhanced data security.
The fund may use these shares to manage cash balances and securities-lending collateral.
The no-action relief is conditioned on a detailed set of safeguards.
These include systems to prevent unauthorized instructions, board of trustees approval and annual review of the arrangements, segregated accounts and wallets for each fund, daily reconciliations, confirmations sent to authorized parties, and at least three independent public accountant verifications per fiscal year (two of them unannounced).
FTIS must also maintain administrative controls that allow it to correct records and transition assets and controls to a successor if needed.
The staff letter draws an analogy to a 1992 no-action position granted to a Franklin entity involving affiliated book-entry share arrangements, finding the modern blockchain-integrated system sufficiently comparable because FTIS retains unilateral control over the official ownership record.
This staff-level relief does not constitute a formal Commission rule or legal conclusion and applies only to the facts and representations presented.
Nonetheless, it marks a practical step toward integrating regulated onchain products into traditional fund operations, potentially improving liquidity management efficiency while preserving investor protections through robust internal controls and oversight.
As of mid-August 2026, the OnChain Fund held approximately $727 million in assets. The development underscores growing regulatory accommodation for carefully structured uses of blockchain technology within existing securities frameworks.
