- Franklin Templeton delves into blockchain technology with a tokenized money market fund, aiming to offer an alternative to stablecoins.
- The firm believes that blockchain technology could transform the mutual fund industry, and other capital markets, by offering increased efficiency and potentially lower fees.
Taking a progressive step into the future of finance, Franklin Templeton, a renowned financial institution, launched a money market fund that leverages public blockchain to log transactions in 2021. This marked the beginning of the firm’s exploratory journey into blockchain technology, the ingenious innovation powering cryptocurrencies.
Roger Bayston, the Head of Digital Assets at Franklin Templeton, conveyed to Blockworks that the firm is engaged with the SEC to unleash the diverse features that blockchain technology could introduce to mutual funds, primarily efficiency improvements and prospective fee reductions.
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In the evolving world of digital finance, such tokenized funds could exist parallel to stablecoins, or even serve as alternatives, suggests Bayston. The learning gleaned from research and development activities within the blockchain domain affirms that this technology can rejuvenate mutual funds under the ’40 Act, maintaining their relevance as investment tools.
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The OnChain U.S. Government Money Fund by Franklin Templeton, which trades under the ticker (FOBXX) on Nasdaq, manages over $290 million in assets as of May 31. The fund initiated the use of the Stellar blockchain for record-keeping two years ago, offering public visibility of transaction activities. The protection of shareholder’s private information is ensured through a distinct secure database.
April witnessed Franklin Templeton declaring the support of the Polygon blockchain for the fund. Bayston recognizes the potential of upcoming Layer 1 blockchain networks as part of the fund’s progressive journey. The fund’s investment strategy centers on US government securities, cash, and repurchase agreements backed by such assets, striving to keep a stable $1 share price.
Each share of the fund is symbolized by a BENJI token, allowing token holders to access the fund in digital wallets via the Benji Investments app. Despite BENJI not being a stablecoin, Bayston elaborates that its regulatory design allows it to function like a stablecoin, all the while producing income.
Moreover, Bayston highlighted blockchain technology’s “transformational” potential for other capital markets. From his experience in mortgage-backed securities, Bayston believes every individual loan in the economy could potentially be an NFT, revolutionizing securitization through smart contracts at the loan level.
The company’s exploration into NFT use cases was confirmed by Mike Muir, Franklin Templeton’s Head of Digital Assets Technology, late last year. This innovative approach by traditional financial institutions, as demonstrated by Franklin Templeton, underscores the tremendous potential of tokenization in the world of finance.
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