Key Takeaways
- • Franklin Templeton raised possible regulatory relief for blockchain-based trading of tokenized money-market funds and ETFs at an Oct. 9 meeting with the SEC's Crypto Task Force.
- • The discussion centered on how Section 22(d) and Rule 22c-1 would apply when tokenized money-market fund shares trade against tokenized NMS stocks in automated liquidity pools.
- • The company asked whether additional relief is needed because a tokenized securities venue is not a national securities exchange.
- • A Sept. 17 SEC order created a temporary, conditional framework for permissioned venues trading tokenized NMS stocks, but it grants no Investment Company Act exemption and does not resolve Section 22(d) or Rule 22c-1 questions.
- • Franklin OnChain U.S. Government Money Fund, which backs the BENJI token, had $1.98 billion in AUM as of April 29; Franklin Templeton's total AUM was $1.68 trillion as of March 31.
Summary
Franklin Templeton raised possible regulatory relief for blockchain-based trading of tokenized money-market funds and exchange-traded funds at an Oct. 9 meeting with the SEC's Crypto Task Force, according to the publisher's report. The proposed agenda focused on how Section 22(d) of the Investment Company Act and Rule 22c-1 would apply when tokenized money-market fund shares trade against tokenized National Market System stocks. Section 22(d) generally governs the prices at which redeemable fund shares may be sold, while Rule 22c-1 generally requires fund transactions to be priced at the next calculated net asset value after an order is received. Applying these requirements to automated liquidity pools could affect how tokenized fund shares are bought and sold.
The discussions also covered whether liquidity providers could charge fees in these transactions, tokenized NMS ETFs paired with tokenized stocks, and permitted payment stablecoins or tokenized money-market funds. Franklin Templeton asked whether further relief would be required because a tokenized securities venue is not a national securities exchange. Another agenda item addressed pools that hold specified tokenized assets and issue interests to liquidity providers, including whether such pools could be treated as investment companies and whether their interests could qualify as securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC's Sept. 17 order established a temporary, conditional framework for certain permissioned venues trading tokenized NMS stocks through automated-market-maker liquidity pools. The framework allows tokenized money-market funds to serve as one possible trading pair, but it does not provide an exemption under the Investment Company Act of 1940 and does not resolve the related Section 22(d) and Rule 22c-1 questions. The framework expires five years after publication.
Franklin OnChain U.S. Government Money Fund, an open-end government money-market fund relying on Rule 2a-7, is the vehicle behind the BENJI token, which represents fund shares. Its assets under management totaled $1.98 billion as of April 29. Separately, SEC staff issued a no-action position on Aug. 12 on custody arrangements for funds investing in the OnChain Fund; that position addressed Section 17(f) and Rule 17f-2 rather than secondary-market trading. Franklin Templeton also connected its Benji Technology Platform with MoonPay Trade on June 2, letting eligible institutions move between supported stablecoins and tokenized money-market fund exposure using on-chain execution.
The discussions also covered whether liquidity providers could charge fees in these transactions, tokenized NMS ETFs paired with tokenized stocks, and permitted payment stablecoins or tokenized money-market funds. Franklin Templeton asked whether further relief would be required because a tokenized securities venue is not a national securities exchange. Another agenda item addressed pools that hold specified tokenized assets and issue interests to liquidity providers, including whether such pools could be treated as investment companies and whether their interests could qualify as securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC's Sept. 17 order established a temporary, conditional framework for certain permissioned venues trading tokenized NMS stocks through automated-market-maker liquidity pools. The framework allows tokenized money-market funds to serve as one possible trading pair, but it does not provide an exemption under the Investment Company Act of 1940 and does not resolve the related Section 22(d) and Rule 22c-1 questions. The framework expires five years after publication.
Franklin OnChain U.S. Government Money Fund, an open-end government money-market fund relying on Rule 2a-7, is the vehicle behind the BENJI token, which represents fund shares. Its assets under management totaled $1.98 billion as of April 29. Separately, SEC staff issued a no-action position on Aug. 12 on custody arrangements for funds investing in the OnChain Fund; that position addressed Section 17(f) and Rule 17f-2 rather than secondary-market trading. Franklin Templeton also connected its Benji Technology Platform with MoonPay Trade on June 2, letting eligible institutions move between supported stablecoins and tokenized money-market fund exposure using on-chain execution.
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