SEC Lets Franklin Templeton Invest Proprietary Cash in Its Tokenized Money Market Fund

The US Securities and Exchange Commission has allowed Franklin Templeton to invest its own money in its tokenized money market fund.

Cointelegraph reported on Aug. 13 that the SEC issued a no-action letter to Franklin Templeton on Aug. 12 saying the agency would not recommend enforcement action if the firm's fund managers invest in the Franklin OnChain U.S. Government Money Fund, provided they meet certain conditions.

A no-action letter states that SEC staff do not intend to pursue enforcement over a specific financial activity. It does not formally change any law or regulation. The decision applies only to the conditions Franklin Templeton presented to the SEC.

The Franklin OnChain U.S. Government Money Fund is a tokenized money market fund that invests in US Treasuries. It aims to maintain a $1 share price, and records fund ownership on a blockchain.

The SEC also allowed Franklin Templeton Investor Services, or FTIS, a Franklin Templeton affiliate, to act as custodian for the tokenized fund and hold its private keys. In that case, it does not have to follow existing rules for storing physical certificates.

The SEC imposed additional investor-protection conditions, including systems to block unauthorized parties from initiating transactions. FTIS must also be able to amend or freeze records if problems arise, and transfer or restore data through another system.

Franklin Templeton manages $2.5 billion of on-chain assets through its tokenized fund.