The SEC's Division of Investment Management has cleared Franklin Templeton's registered funds to use its blockchain-based OnChain U.S. Government Money Fund (FOBXX/BENJI) for cash management and collateral. The decision provides relief from physical-vault custody requirements under Rule 17f-2 of the Investment Company Act of 1940. Under the arrangement, Franklin Templeton Investor Services will maintain control of private keys and Stellar blockchain wallets, subject to 12 strict conditions including daily reconciliations and three annual independent accountant verifications.
SEC no-action letter issued
- ▪The SEC staff's no-action letter represents only an enforcement position based on Franklin Templeton's stated facts and does not constitute a formal rule, regulation, or legal conclusion.
- ▪The U.S. Securities and Exchange Commission's Division of Investment Management issued a no-action letter on August 12, 2026, clearing Franklin Templeton's registered funds to invest in its blockchain-based OnChain U.S. Government Money Fund.
Franklin OnChain Money Fund
- ▪The Franklin OnChain U.S. Government Money Fund invests at least 99.5% of its assets in government securities, cash, and fully collateralized repurchase agreements to maintain a stable $1 share price.
- ▪The Franklin OnChain U.S. Government Money Fund, also known as FOBXX or BENJI, had approximately $726 million in assets under management as of August 12, 2026.
Rule 17f-2 custody relief
- ▪The SEC's relief exempts Franklin Templeton's registered funds from physical-vault and certificate requirements under paragraphs (b), (e), and (f) of Rule 17f-2 of the Investment Company Act of 1940.
- ▪The SEC staff cited a 1992 no-action letter also involving Franklin Templeton to justify the custody relief for the blockchain-integrated book-entry arrangement.
Blockchain wallet security controls
- ▪Franklin Templeton Investor Services' security setup for private keys includes multisignature systems, multiparty computation, distributed signers, and offline recovery capabilities.
- ▪Franklin Templeton Investor Services retains administrative controls to correct unauthorized transactions, freeze or migrate wallet records, and restore the official shareholder file.
- ▪Franklin Templeton Investor Services will create and control separate blockchain wallets on the Stellar network for each participating fund and maintain sole possession of the private keys.
BENJI operational features
- ▪The Franklin OnChain U.S. Government Money Fund launched on Stellar in 2021 and has since expanded to other blockchains, including Ethereum and Solana.
- ▪The Franklin OnChain U.S. Government Money Fund offers operational advantages including hourly net asset value calculations, intraday trading, faster transaction processing, and potentially lower costs.
Independent verification requirements
- ▪The independent verification conditions mandate that at least two of the three annual accountant checks must be unannounced.
- ▪The SEC's relief requires independent accountants to verify and reconcile transfer-agent records against the books of the investing funds and FOBXX at least three times each fiscal year.
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