SEC Opens Franklin's Traditional Funds to Its Onchain BENJI Fund
The SEC's Division of Investment Management issued a no-action letter on 12 August 2026 letting Franklin Templeton's registered funds hold shares of its onchain money market fund. The staff position frees those funds from physical-vault custody rules under the Investment Company Act of 1940.
SEC staff clears Franklin funds to hold onchain fund
The Division of Investment Management at the United States Securities and Exchange Commission (SEC) issued a no-action letter on 12 August 2026. It clears the way for Franklin Templeton's traditional registered funds to hold shares of the Franklin OnChain U.S. Government Money Fund. The fund carries the ticker FOBXX and is known as BENJI. Its investing funds can use it for cash management, including collateral for securities lending. The move lets conventional funds tap features of the onchain fund, such as hourly pricing and faster transaction processing.
Relief waives physical-vault custody rules for digital shares
The letter cites Section 17(f) and Rule 17f-2 of the Investment Company Act of 1940. Those rules set custody requirements built for physical or certificated securities. The staff said it would not recommend enforcement action if the funds skip paragraphs (b), (e) and (f) of Rule 17f-2. This removes a mismatch between digital fund shares and older vault-based rules. The arrangement counts as self-custody because FTIS is affiliated with the investing funds. The SEC staff cited a 1992 no-action letter involving Franklin as precedent.
Franklin's transfer agent controls records on Stellar
The fund operates as a government money market fund under Rule 2a-7. Franklin Templeton Investor Services (FTIS), an affiliated transfer agent, maintains the official ownership record. It runs an integrated system that links internal book-entry data with blockchain records. The blockchain portion logs transactions, net asset values and dividend information. Stellar is the primary network, though other eligible chains may be used on request. FTIS creates a separate wallet for each investing fund and keeps the private keys. It retains control to correct errors, freeze records or restore ownership data if needed.
Twelve conditions govern the custody arrangement
The staff granted the position subject to 12 conditions. Each fund needs a segregated account and its own blockchain wallet. Confirmations must be reconciled daily against each fund's authorizations. Each fund's board must approve the arrangement and review it at least once a year. Independent accountants must verify the records at least three times each fiscal year, with two checks unannounced.
Stellar token trades near 16 cents at publication
Most BENJI assets sit on the Stellar network. Stellar's XLM token traded at $0.16 at the time of publication, up 0.18% over the past 24 hours (CoinPaprika, 13 August 2026). The token held a market value near $5.56 billion at that time (CoinPaprika, 13 August 2026).
"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", 12 August 2026. — James Seyffart, Analyst, Bloomberg Intelligence
The letter is a staff position, not a rule
The SEC stressed that the letter reflects staff views only. It is not a rule or a formal approval, and it has no legal force. The staff position applies only to the facts Franklin Templeton presented in its request.
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