• Franklin Templeton, a financial giant, is leveraging blockchain technology to enhance efficiency in capital markets, potentially reducing mutual fund fees.
• The company’s exploration of blockchain as an underlying technology of cryptocurrencies started with a public blockchain-based money market fund in 2021.

Embracing blockchain technology, Franklin Templeton, an investment management giant, has embarked on an exciting venture that is set to revolutionize capital markets. Initiated with the introduction of a money market fund recorded on a public blockchain in 2021, the firm’s journey into the world of cryptocurrencies’ core technology has been steadily progressing.

Roger Bayston, the head of digital assets at Franklin Templeton, revealed the company’s ongoing work with the SEC to harness the vast potential of blockchain technology. He emphasized that the benefits for mutual funds include efficiency improvements, which could subsequently lead to lower fees.

According to Bayston, the progression of these funds could make them suitable counterparts or even alternatives to stablecoins. The insights gleaned from the company’s research and development activities within the blockchain realm have instilled confidence in its transformative potential for the mutual fund industry.

Under the ticker (FOBXX), Franklin Templeton’s OnChain U.S. Government Money Fund, with over $290 million in assets under management as of May 31, started using the Stellar blockchain for its record-keeping two years ago. The public can view the transaction activity, with shareholders’ private data securely stored separately. In April, Franklin Templeton announced the fund’s support on the Polygon blockchain as well.

The fund invests over 99% of its assets in US government securities, cash, and repurchase agreements collateralized by such assets, striving to maintain a stable $1 share price. One share of the fund is represented by one BENJI token, accessible through the Benji Investments app. Despite not being a stablecoin, BENJI’s regulatory framework aims to keep its net asset value stable, acting similar to a stablecoin while generating income.

The transformative potential of blockchain extends beyond mutual funds. As per Bayston, blockchain technology is poised to be a game-changer for other capital markets, citing his experience with mortgage-backed securities. He sees the possibility of each individual loan issued in the economy functioning as a Non-Fungible Token (NFT) and envisages blockchain drastically altering the Wall Street’s securitization machine via smart contracts.

Similar sentiments about the potential of tokenization have been expressed by other traditional finance players. WisdomTree is preparing to launch “blockchain-enabled funds” on the Stellar blockchain, and BlackRock CEO Larry Fink has noted the myriad opportunities tokenization could offer in driving efficiencies in capital markets.

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