Bybit and Franklin Templeton have rolled out an off-exchange collateral program that lets eligible institutional clients pledge tokenized money-market fund shares to support trading positions. The shares are issued through Franklin Templeton's Benji platform, which handles the blockchain recordkeeping and transfer side of the arrangement. The two firms announced the collaboration on September 28.
The setup is straightforward on paper: institutions can keep their collateral with a regulated custodian instead of moving assets onto the exchange. That cuts down on counterparty exposure — the risk that funds sitting on a trading venue are stuck there if something goes wrong.
Collateral that keeps earning
What makes the structure different from a standard margin arrangement is that the pledged assets don't sit idle. Because the collateral is made up of tokenized money-market fund shares, it can keep generating yield from the underlying fund while it's being used to back trades. Institutions get trading capacity and the fund keeps working in the background.
That's the pitch for treasury desks and asset managers who've been wary of parking idle capital on exchanges. Tokenized money-market products have become one of the more concrete use cases for blockchain-based finance, largely because they don't ask institutions to take on unfamiliar risk — the underlying asset is the same short-duration, low-volatility paper they already hold.
Where Benji fits in
Franklin Templeton's Benji platform is the plumbing here. It provides the blockchain-integrated recordkeeping and transfer infrastructure for the tokenized fund shares, which is what allows them to move between custody and collateral status without a traditional settlement cycle.
The platform has been the asset manager's main vehicle for pushing tokenized fund products into institutional workflows. Bybit is the first exchange counterparty in this particular arrangement, and the program is limited to eligible institutional clients — not the general retail user base.
A custody-first tradeoff
Off-exchange collateral models have picked up traction because they address a specific complaint from institutional traders: you shouldn't have to choose between keeping assets safe and getting them to do something useful. The tradeoff is complexity. Custody arrangements, eligibility checks, and the legal treatment of tokenized fund shares as collateral all have to line up before a client can use the structure.
Bybit and Franklin Templeton say they plan to look at additional tokenized investment and yield products aimed at wallet-based users down the line. No timeline has been given for that, and the current program is scoped to institutions only.
For now, the program is live for eligible clients. The open question is how many institutions actually route collateral through it — and whether other exchanges and asset managers follow with similar structures. Franklin Templeton and Bybit haven't said which products they'll build next or when wallet users might see anything.
