The SEC's Division of Investment Management said Wednesday it would not recommend enforcement action if Franklin Templeton's U.S. registered funds hold shares of its onchain money market fund through an affiliated blockchain-integrated custody and settlement system. The statement gives the asset manager a regulatory green light to use its own blockchain infrastructure for fund holdings, a step that could reshape how money market funds are managed.
What the SEC said
The division's position is a no-action letter, meaning it won't recommend the SEC pursue charges against the funds for holding shares through that system. The arrangement involves Franklin Templeton's onchain money market fund and a custody and settlement system that is both affiliated and blockchain-integrated. The SEC's statement is specific to this fact pattern, not a blanket approval of blockchain-based fund operations. It's a staff-level position, not a formal rule or a vote by the full commission.
This is a notable signal for the asset management industry. The SEC has been cautious about crypto-related products, but this statement suggests a willingness to accept blockchain infrastructure when it's part of a registered fund's own operations. For Franklin Templeton, it removes a layer of regulatory uncertainty around its onchain fund. For others, it offers a potential template for how to structure similar offerings. The decision doesn't change any rules, but it does provide clarity for this specific arrangement.
The details
Franklin Templeton's onchain money market fund is a real product, and the custody and settlement system is affiliated with the asset manager. The SEC's no-action position means the funds can hold shares through that system without facing enforcement from the regulator. The statement doesn't change any rules, but it does provide clarity for this specific arrangement. It's a narrow approval, but it's an approval nonetheless.
The SEC's statement is limited to this case. Other asset managers with similar blockchain-based systems will likely need to seek their own no-action relief if they want the same assurance. The decision doesn't set a binding precedent, but it does show the SEC is willing to engage with these structures on a case-by-case basis. For now, Franklin Templeton has a clear path to proceed with its onchain fund.
