- SEC relief lets Franklin Templeton funds use its OnChain U.S. Government Money Fund for cash management and lending collateral.
- Franklin will use separate Stellar wallets for each fund, with FTIS maintaining private keys and official ownership records.
- Fund boards must approve the blockchain arrangement annually, while independent accountants must conduct at least three yearly verifications.
The SEC Division of Investment Management gave Franklin Templeton no-action relief on August 12, 2026. The decision lets Franklin’s registered funds use its OnChain U.S. Government Money Fund for cash management and securities lending collateral. The relief covers blockchain custody and ownership records, replacing certain physical-security requirements under Rule 17f-2.
SEC Relief Covers Blockchain Custody
The relief covers Section 17(f) and paragraphs (b), (e), and (f) of Rule 17f-2. Franklin’s funds can hold OnChain Fund shares through Franklin Templeton Investor Services LLC, or FTIS. FTIS serves as transfer agent and maintains the official ownership record.
The system combines an internal book-entry database with blockchain records covering purchases, redemptions, dividends, NAVs, and trade dates. FTIS links the records in real time to create the master securityholder file. It also controls blockchain permissions, smart contracts, and administrative functions tied to ownership records.
Funds Will Use Separate Blockchain Wallets
FTIS will create a separate Stellar blockchain wallet for each investing fund. It will maintain the private keys for those wallets. The wallet system uses multisignature, multiparty computation, distributed signers, and offline recovery measures.
However, FTIS retains control over the official ownership record. Its administrative controls allow it to correct errors, freeze wallets, migrate records, or restore ownership information. The arrangement will support cash balances and securities lending collateral. Franklin Templeton cited hourly NAVs, intraday trading, and faster processing.
SEC Sets Conditions For Fund Oversight
The SEC staff requires each fund to maintain controls over authorized instructions and transaction reviews. FTIS must provide transaction confirmations and maintain segregated records for each fund.
Each fund’s board must approve the arrangement and review it annually. FTIS must also transfer records and administrative controls to a successor. Independent public accountants must compare FTIS records with fund records. They must perform at least three investment verifications each fiscal year.
At least two checks must occur without advance notice. The funds must also reconcile differences found during those examinations. The SEC staff said the letter addresses enforcement action only. It does not amend existing law or create new legal obligations.
