Franklin Templeton has received no-action relief from staff at the U.S. Securities and Exchange Commission for a proposed custody arrangement involving shares of its Franklin OnChain U.S. Government Money Fund, allowing participating registered funds to use the blockchain-based money market fund for cash management and securities lending collateral.
The SEC Division of Investment Management issued the no-action position in response to Franklin Templeton’s proposed structure. The arrangement involves the Franklin OnChain U.S. Government Money Fund, commonly associated with the ticker FOBXX, whose ownership records are maintained through a system combining conventional recordkeeping with blockchain technology.
The SEC staff’s position allows participating funds to use FOBXX for cash management and securities lending collateral while recording ownership through Franklin Templeton’s blockchain-integrated system rather than relying solely on rules designed for physical or certificated securities.
The decision also allows Franklin Templeton Investor Services, known as FTIS, to serve as custodian for participating funds without complying with certain requirements under Rule 17f-2 that were developed around traditional securities custody arrangements.
Blockchain Records Support Fund Operations
The OnChain Fund is a registered government money market fund, with its official shareholder records maintained through a hybrid system that combines Franklin Templeton’s internal records with blockchain technology.
The blockchain component records several aspects of fund activity, including purchases, redemptions, dividend distributions, net asset values and trade information. FTIS, however, retains control over the official ownership record, creating a structure in which blockchain technology supports transaction processing while conventional recordkeeping remains part of the custody framework.
Franklin Templeton said the arrangement could provide participating funds with greater flexibility in managing cash and securities lending collateral. The structure is also expected to support more frequent valuation and trading capabilities than traditional fund processes.
The company identified hourly net asset value calculations, intraday trading and faster transaction processing among the potential benefits. The blockchain-based structure could also help reduce operating expenses by streamlining certain processes associated with fund transactions and recordkeeping.
The proposed framework could give institutional users access to faster fund transactions, hourly net asset values, and intraday trading while expanding the practical use of blockchain technology in traditional asset management.
Stellar-Based Custody Infrastructure
Under the proposed arrangement, FTIS will establish a separate digital wallet on the Stellar network for each participating fund. FTIS will retain control of the associated private keys and operate security measures designed to protect the assets and transaction infrastructure.
The security framework includes multisignature technology, multiparty computation, distributed signers, and offline recovery capabilities. These measures are intended to reduce the risks associated with concentrating control over digital assets or relying on a single mechanism for transaction authorization and recovery.
The SEC staff’s no-action position is subject to several safeguards. Each participating fund must have a separate wallet, while transactions must be reconciled daily. Additional requirements cover authentication controls, oversight by fund boards and independent verification.
🚨NEW: The @SECGov’s Division of Investment Management has issued a no-action letter to @FTDA_US, clearing the way for its registered funds to use its onchain money market fund ($FOBXX) to manage cash, including collateral for securities lending.
The relief allows Franklin… pic.twitter.com/4TFQ2vqy8X
— Eleanor Terrett (@EleanorTerrett) August 12, 2026
At least three independent accountant verifications are required during each fiscal year, adding another layer of review to the blockchain-supported custody arrangement.
SEC Relief Comes With Important Limitations
The SEC staff also made clear that the no-action letter has a limited legal effect. It represents the staff’s position regarding potential enforcement under the circumstances described in the request and does not establish a new rule or regulation.
The position also does not amount to formal SEC approval of the arrangement. Franklin Templeton and participating funds therefore remain responsible for complying with applicable securities laws and other regulatory requirements.
The decision marks another step in the integration of blockchain infrastructure with regulated investment products, potentially creating a model for faster and more flexible fund operations while retaining conventional ownership controls and regulatory safeguards.
The development highlights the expanding role of blockchain in traditional financial markets, where asset managers are increasingly exploring ways to combine distributed ledger technology with established regulatory and custody frameworks. For Franklin Templeton, the SEC staff position provides additional flexibility for deploying its onchain money market fund within institutional cash management and securities lending operations.
