Franklin Templeton Seeks SEC Exemptions for Tokenized ETF Trading in Bitcoin (BTC) Market Rules

Oct 9 Task Force Meeting

Franklin Templeton (NYSE: BEN) has asked the Securities and Exchange Commission whether exemptions would let tokenized money market funds and ETFs trade through blockchain venues. The asset manager reported preliminary assets under management of $1.79 trillion as of Sept. 30, and its representatives met SEC crypto task force staff on Oct. 9. The meeting memo the agency published lists only the agenda the company submitted; it records no approval and no regulatory conclusion. The agenda asks whether investors on a blockchain trading platform could exchange blockchain-based fund shares for tokenized NMS stocks, a category covering exchange-listed stocks and ETF shares subject to national trade reporting rules. Pricing rules sit at the center of the request. Section 22(d) of the Investment Company Act of 1940 generally requires fund shares to be sold at the price stated in the prospectus, while Rule 22c-1 generally requires trades to be priced at the next computed share value after an order arrives, a figure reflecting fund assets minus liabilities divided by shares outstanding. Franklin Templeton asked whether these provisions need exemption for the proposed trading pairs, and whether providers supplying assets to those trades may charge a service fee. For tokenized ETFs, the agenda contemplates pairs against another tokenized stock, an approved payment stablecoin or a tokenized money market fund, and asks whether the same fund pricing terms apply when the liquidity provider charges. It also frames the tokenized securities venue as a distinct entity from a national securities exchange, which raises whether separate relief is needed. The broadest question concerns liquidity pools: a pool holding assets to facilitate trades pools investor money into securities, a structure that can trigger registration and fund management requirements under the 1940 Act, and the agenda asks whether the pool itself and the interests received by its providers need exemption under the Securities Act of 1933 and the Securities Exchange Act of 1934.

Sept 17 Innovation Exemption

Relief for tokenized stocks already exists in one form. On Sept. 17 the SEC issued an Innovation Exemption, announced together with a request for public comment. The order gives qualified blockchain trading venues and liquidity providers conditional relief from certain exchange and dealer requirements so tokenized NMS stocks can trade in pools accessible to approved participants. Conditions include trading volume limits, shareholder rights equivalent to the listed shares, publicly auditable smart contracts and trading halts aligned with the primary listing exchange. The exemption expires five years after publication in the Federal Register, and the SEC asked for comments on modifications and follow-up measures. The order states plainly that it provides no Investment Company Act relief and flags Rules 22(d) and 22c-1 as separate issues, which is exactly the gap the Franklin Templeton agenda targets. The firm runs blockchain fund recordkeeping of its own alongside these discussions. Its Franklin Onchain U.S. Government Money Fund (FOBXX), launched in 2021, keeps share ownership on chain: each BENJI token represents one fund share, and transferring the token transfers the share. The Benji technology platform processes transactions and tracks holders, and the fund’s five-year anniversary announcement described peer-to-peer share transfers between wallet addresses and dividend distributions over the year. SEC staff issued a no-action position on Aug. 12 covering custody arrangements for Franklin funds that invest in the product, permitting specific arrangements with safeguards and board oversight. Institutional reach has widened too: a June 2 integration with MoonPay links the Benji platform to institutional trading infrastructure so eligible institutions can move between supported stablecoins and tokenized money market fund positions, and a May 12 agreement with Payward, the operator behind Kraken, outlined tokenized investment and yield products including BENJI integration in the institutional sphere where regulation allows.

Our reading of the filing is that it maps where fund relief stops. The Sept. 17 order moved tokenized equity trading forward but deliberately left the 1940 Act untouched, and the agenda names the precise provisions that block the bridge between crypto-style liquidity pools and fund shares. Because pools replace conventional order book matching on these venues, whether a pool holding tokenized assets counts as an investment company is the structural question: if it does, registration and management requirements would attach to infrastructure that merely swaps a tokenized ETF against a money market fund. Tokenized shares deliver direct underlying exposure rather than futures-based wrappers, so the pricing rules around share valuation carry the investor protection load. The outcome reaches beyond funds, into the same market-rule framework now shaping how Bitcoin (BTC) and tokenized instruments trade on US venues, and the SEC has asked the public to weigh in before the five-year clock runs down.