Franklin Templeton has expanded its tokenized collateral service to the crypto exchange Bybit, allowing traders to post tokenized money market fund shares as collateral for USDT and USDC credit lines. The shares continue to earn yield on the underlying assets while they're locked up — a feature that could make the product more attractive to traders who don't want to choose between earning returns and meeting margin requirements.
How the collateral arrangement works
On Bybit, users can pledge Franklin Templeton's tokenized money market shares to secure credit lines denominated in USDT or USDC. The shares represent an ownership stake in a money market fund and generate yield from the fund's holdings, typically short-term government securities. While the shares are tied up as collateral, that yield keeps accruing.
The setup is meant to solve a common problem for active traders: capital sitting idle in a margin account doesn't earn anything, but moving it into a yield-bearing product usually means it can't be used for trading. Franklin Templeton's service tries to bridge that gap by letting the same asset do both jobs — serve as collateral and collect yield.
Why Bybit is adding tokenized collateral
Bybit is one of the larger offshore crypto derivatives exchanges, with a user base that trades a wide range of perpetual futures and spot pairs. For the exchange, accepting tokenized money market shares as collateral could reduce the need for traders to hold large balances of stablecoins that don't earn interest. It also gives Bybit a way to differentiate its margin offering at a time when competition among derivatives platforms is intense.
The integration is limited to USDT and USDC credit lines for now. That means a trader who wants to borrow stablecoins against their holdings can use the tokenized shares as security. It's a narrower use case than posting them as collateral for all types of trades, but it covers a common need in crypto markets where stablecoin liquidity is central to trading strategies.
Yield while locked
The yield-earning feature is the part that stands out. In traditional finance, posting Treasury bills or money market fund shares as collateral at a broker often means you keep receiving the interest — the broker holds the securities but you retain the economic benefit. Franklin Templeton is effectively replicating that structure on-chain, using tokenized shares that can move between wallets and platforms while still tied to the underlying fund.
For traders, the math is straightforward: if you're going to hold collateral anyway, you might as well earn something on it. Whether that's enough to pull users toward Bybit's credit lines depends on the rates the exchange charges for borrowing USDT and USDC, which aren't specified in the announcement. If borrowing costs exceed the yield on the money market shares, the appeal shrinks.
What to watch
Franklin Templeton has been among the more active traditional asset managers in tokenization, and this Bybit deal extends its reach into crypto-native trading venues. The company hasn't said whether the collateral service will expand to other exchanges or additional collateral types. Bybit users who want to try it can now use the tokenized shares against USDT and USDC credit lines, but the terms — including haircuts, borrowing rates, and eligible jurisdictions — will determine how much traction it gets. Details on those terms weren't included in the initial announcement.
