Franklin Templeton will introduce a new money market fund, which uses a public Blockchain to track transactions in 2021. The financial institution began exploring the technology behind cryptocurrency.
Roger Bayston is the head of digital asset at Franklin Templeton. He told Blockworks that the company works with the SEC in order to unlock “a rich set of features” Blockchain technology can help mutual funds to increase efficiency and reduce fees.
He added that in the future, these funds can be used as an alternative or alongside stablecoins.
“The learnings we are having by just doing [research and development] activity inside of blockchain and assembling development technology resources, gives us confidence that the blockchain seems to enable and probably refresh the ‘40 Act mutual fund and create continued relevance for it as an investment tool.”
A ‘refresh’ to the mutual fund
As of May 31, the OnChain U.S. Government Money Fund ($1.4 trillion) managed by the $1.4 trillion asset management firm, traded on Nasdaq as FOBXX, had assets worth more than $290 millions.
It began using the Stellar blockchain for its record-keeping two years ago — allowing the transaction activity to be publicly viewable. The private data of shareholders is kept on a secure, separate database.
Franklin Templeton announced in April that the Polygon Blockchain would also be used to support the fund.
“Whether it’s Polygon now…or even other new layer-1s that are developing, this is all part of the future journey,” Bayston said.
The fund’s assets are invested in US government bonds, cash and collateralized repurchase contracts. It also attempts to maintain $1 per share.
The BENJI Token represents one share in the fund. Holders of tokens can then access their fund via digital wallets using the Benji Investments App. Franklin Templeton conducts Know-Your-Customer (KYC), anti-money laundering checks (AML) during the onboarding process.
Though BENJI is not a stablecoin, Bayston explained, its regulatory construct — which seeks to keep its net asset value stable — allows it to act as one while also generating income.
“Investors are waking up to the opportunity that there’s probably, on a forward basis, going to be an array of on- and off-ramps for you to be able to utilize in and out of digital assets,” He said.
“If a money fund continues to offer attractive yield, we would expect investors to continue to find it as, at a minimum, a complementary product as they use currency stablecoins, which do not offer income.”
Blockchain tech to be ‘transformational’ in other ways
Blockchain Technology is Set to Be “transformational” Bayston stated that other capital markets will be able to grow in the future.
Bayston who started working for Franklin Templeton noted his familiarity with mortgage-backed security, which is a collection home loans, and other real estate obligations.
Bayston stated that although NFTs may be thought of by some as digital art or digital loans, any loan given out in the economy can also be considered an NFT.
“I would question whether this Wall Street machine of securitization isn’t somehow transformed by blockchain, because through smart contracts I don’t have to pool a whole bunch of loans and then apply that cash flow structure,” Bayston made the comment during a Tuesday panel discussion held at the DACFP Vision event. “I can do that right at the loan level.”
Bayston made his comments after Mike Muir told Blockworks in December last year that Franklin Templeton was looking into NFT applications. NFTs were distributed to participants of the first Innovation Forum, held in September.
Tokenization is a concept that has been understood by traditional finance players.
WisdomTree will debut soon “blockchain-enabled funds” Stellar will be used in its new financial app. Hamilton Lane announced in 2013 that several funds would be tokenized using Polygon, and possibly other public chains.
In a March letter, BlackRock’s CEO Larry Fink told investors that tokenizing assets would offer a variety of opportunities. “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”
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