Finance12 August, 20263 min read
SEC Issues No-Action Letter Allowing Franklin Templeton Funds To Hold FOBXX BENJI Shares
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SEC issues no-action letter enabling registered funds to hold Franklin Templeton's on-chain money fund. Guardrails/custody structure allow investment without immediate enforcement action.
8 outlets told this the same way.
SEC no-action for BENJI
The U.S. Securities and Exchange Commission’s Division of Investment Management issued a no-action letter that would not recommend enforcement action under Section 17(f) and Rule 17f-2 if Franklin Templeton’s registered mutual funds and ETFs invest in shares of the Franklin OnChain U.S. Government Money Fund, known by its ticker FOBXX.
“The SEC has cleared Franklin Templeton’s registered funds to invest in its blockchain based BENJI money market fund.”
The SEC letter describes a custody structure that lets registered funds hold BENJI shares without meeting certain physical custody requirements, with Franklin Templeton Investor Services creating blockchain wallets and retaining control of the corresponding private keys.
The arrangement combines Franklin’s existing transfer-agent shareholder recordkeeping with blockchain transaction data, and the SEC said it would not recommend enforcement action if the funds hold FOBXX under the proposed arrangement.
The SEC’s staff position is tied to the Investment Company Act of 1940 custody framework, and the letter says it would not recommend enforcement action if the funds establish custodial arrangements in the manner and subject to the representations described below.
Bloomberg ETF analyst James Seyffart said on X, "Essentially, it opens the door for Franklin’s registered funds (mutual funds, ETFs, etc) to hold its OnChain fund despite not technically satisfying 1940 Act custody rules," framing the decision as a route for conventional products to gain exposure to the blockchain-based fund.
How the custody system works
In the SEC’s response of the Office of Chief Counsel, Franklin Templeton Investor Services LLC (FTIS) is described as the OnChain Fund’s transfer agent and as maintaining the official record of share ownership using a proprietary recordkeeping system integrated with blockchain/distributed ledger technology. The SEC letter says the Integrated System includes an internal book-entry system that records private shareholder information and one or more blockchains that record transactional and other anonymous shareholder information, with FTIS joining the records on a real-time basis by referential data linkage. The SEC letter states that FTIS controls the Integrated System, including permissioning, smart-contract administrative functions and referential linkage, and that all fund and shareholder records in the Integrated System are under FTIS’s full control.
FTIS is also described as maintaining separate administrative key-control environments that allow it to sign and submit administrative instructions affecting blockchain records associated with an investor wallet, including capabilities to "maintain, correct, freeze, migrate, or restore the official record of share ownership". Franklin Crypto head Christopher Perkins said in a post dated August 12, 2026, "I'm very excited about today's no-action letter from the @SECGov," adding that "Global market structure is changing as we enter the era of 24/7 markets."
Conditions and market impact
The SEC staff position is presented as a set of conditions under which the funds can invest in the OnChain Fund without complying with paragraphs (b), (e) and (f) of Rule 17f-2, and the letter describes a layered wallet security architecture with multi-signature and multi-party computation techniques.
“The SEC said it will not pursue enforcement action if Franklin Templeton’s funds start investing cash in the asset manager’s own tokenized money-market fund.”
The Defiant’s account of the SEC staff clearance says the relief replaces physical procedures with digital controls, including that the arrangement counts as self-custody because FTIS is affiliated with the investing funds.
The Defiant also reports that the SEC staff agreed not to enforce paragraphs (b), (e) and (f) if Franklin’s funds and transfer agent meet 12 conditions covering account segregation, transaction controls, reconciliation, board oversight and independent verification.
The Defiant states that FOBXX invests at least 99.5% of its assets in government securities, cash and fully collateralized repurchase agreements, and it reports that FOBXX had a total asset value of about $726.6 million as of Aug. 12.
In a separate framing, Cointelegraph reported that the SEC said it will not pursue enforcement action if Franklin Templeton’s fund managers invest cash in the Franklin OnChain U.S. Government Money Fund, and it described the SEC’s letter as allowing FTIS to act as custodian and hold private keys without adhering to existing physical-custody rules.