Katherine Ross

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The value of tokenized US Treasury products has skyrocketed 1,000% since the start of this year, a Coinbase report revealed.&nbsp;



I think we can all agree that’s a crazy statistic, though maybe not that surprising. The two big giants in this space right now are heavyweights, to say the least. You’ve got Franklin Templeton’s onchain government security fund and then you have BlackRock’s BUIDL.&nbsp;



These tokenized products — which include the aforementioned funds — have reached a market cap of $1.29 billion. Per data from rwa.xyz, BUIDL has taken the lead here, sitting at $462 million (up roughly $80 million in May when it was at $382 million) but Franklin’s fund, aka the OG of the two, has $344 million (down roughly $16 million from last month).&nbsp;&nbsp;



That puts BUIDL at nearly 30% of the total group and FOBXX at nearly 22%.&nbsp;



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="523" src="https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png" alt="" class="wp-image-88069" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2024/06/image-14.png?w=80 80w" sizes="(max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">This chart from rwa.xyz showcases the leaders of tokenized US Treasury products</figcaption></figure>



Of course, there are some differences between the funds.&nbsp;



“They&#8217;re both money funds, we can speak to the differences in that the Franklin onchain fund, Benji, is a public security […] we&#8217;ve had to work in more close collaboration and cooperation with the SEC as it relates to the permissions that we are trying to gain in using public blockchain technologies in delivering services to clients,” Roger Bayston of Franklin Templeton told me.&nbsp;



The difference, to Bayston’s own point, is important to distinguish. Essentially, Benji has the SEC’s nod of approval to use public blockchains “in this transfer agency process and procedure.”



“Being on the public blockchains is going to deliver more utility to customers and clients than in the shadow record-keeping,” he said.&nbsp;



Coinbase noted that the primary users of BUIDL have turned out to be crypto hedge funds and market makers. Again, not really a surprise given that BUIDL has a $5 million minimum investment (David pointed this out earlier this month), but the appetite is clearly there.&nbsp;



Franklin Templeton is going a bit of a different route, or so it seems by the announcement they made earlier this month. The firm enabled investors to convert USDC to US dollars, which can then be put into FOBXX, their onchain tokenized money fund. They also don’t require a minimum investment.&nbsp;



“This is an exciting step in our continued journey to make the digital assets ecosystem more accessible to both traditional and blockchain-native investors. We are also building the framework for BENJI tokens to be interoperable with additional tokens in the not-too-distant future,” Bayston said separately in a <a href="https://www.franklintempleton.com/press-releases/news-room/2024/franklin-templeton-enables-usdc-conversions-on-benji-investments-platform">press release</a> accompanying the announcement earlier this month.&nbsp;



Tokenized RWAs might not sound sexy — and I’m on board with finding something else to call them other than RWAs — but there’s no doubting the demand, especially for funds backed by the heavyweights in the TradFi space.&nbsp;



We’ve previously discussed the appetite that institutions have for blockchain technology, and this is just one way to prove it.&nbsp;&nbsp;



Though between the aforementioned 1,000% increase and the <a href="https://www.coinbase.com/blog/the-state-of-crypto-the-fortune-500-moving-onchain">fact</a> that there’s been a roughly 39% increase of Fortune 100 companies launching onchain projects, I’d say not only are we back (putting the current market aside, duh) but honestly, we’ve entered brand new territory.&nbsp;



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



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Empire Newsletter: How 2 funds are dominating tokenized US Treasury products

Ben Strack

In 2021, Franklin Templeton introduced a money market fund that used a public blockchain to record transactions. This marked the beginning of the financial institution&#8217;s exploration of cryptocurrency&#8217;s underlying technology.



Roger Bayston, head of digital assets at Franklin Templeton, told Blockworks the company is working with the SEC to unlock “a rich set of features” that blockchain tech enables for mutual funds, including efficiency gains and, in turn, potential lower fees.



Going forward, such funds could be used alongside stablecoins, or even an alternative to them, he added.&nbsp;



“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.”&nbsp;&nbsp;



<h2 class="wp-block-heading">A ‘refresh’ to the mutual fund&nbsp;</h2>



The $1.4 trillion asset manager’s OnChain U.S. Government Money Fund, which trades on the Nasdaq under the ticker (FOBXX), had more than $290 million in assets under management as of May 31.&nbsp;&nbsp;



It began using the Stellar blockchain for its record-keeping two years ago — allowing the transaction activity to be publicly viewable. Shareholders’ private information remains kept in a separate secure database.&nbsp;



Franklin Templeton revealed in April the fund would be supported on the Polygon blockchain as well.&nbsp;



“Whether it’s Polygon now…or even other new layer-1s that are developing, this is all part of the future journey,” Bayston said.&nbsp;



The fund invests more than 99% of its assets in US government securities, cash and repurchase agreements collateralized by such assets. It also tries to maintain a stable $1 share price.



One share of the fund is represented by one BENJI token, and token holders can access the fund in digital wallets through the Benji Investments app. Franklin Templeton does know-your-customer (KYC) and anti-money laundering (AML) checks while onboarding users.



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.&nbsp;



“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.&nbsp;



“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.”



<h2 class="wp-block-heading">Blockchain tech to be ‘transformational’ in other ways</h2>



Blockchain technology is set to be “transformational” for other capital markets going forward, Bayston said.



Bayston, who began working at Franklin Templeton, noted his deep familiarity in mortgage-backed securities, which comprise a collection of home loans and other real estate debt.



While NFTs are often thought of as digital art, Bayston said, each individual loan issued in the economy could be an NFT.&nbsp;



“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 added during a panel at the DACFP Vision conference Tuesday. “I can do that right at the loan level.”&nbsp;



Bayston’s comments come after Mike Muir, Franklin Templeton’s head of digital assets technology, told Blockworks last December the firm was <a href="https://blockworks.co/news/asset-manager-exploring-nft-use-cases">exploring NFT use cases</a>. The company issued NFTs to attendees of its first Innovation Forum held in September.



Traditional finance players have expressed that they understand the potential of tokenization.



WisdomTree is <a href="https://blockworks.co/news/wisdomtrees-latest-blockchain-enabled-funds-to-use-ethereum-stellar">getting set to debut “blockchain-enabled funds”</a> that utilize the Stellar blockchain on its upcoming financial app. Private markets investment firm <a href="https://blockworks.co/news/private-markets-investment-firm-hamilton-lane-to-tokenize-3-funds">Hamilton Lane first revealed last year</a> it would be tokenizing several of its funds using Polygon and potentially other public chains.



BlackRock CEO Larry Fink said in a <a href="https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter">letter</a> to investors in March that <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization">the tokenization of assets could offer various opportunities</a>, including “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



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A stablecoin with yield? Tokenized fund perhaps just the start for fund giant

<div id="highlights-block_627cbf3a3c697" class="highlights">
 <ul>
 <li>Franklin Templeton expects to offer crypto products “when the regulatory landscape provides that opportunity,” firm’s head of digital assets says</li>
 <li>The company recently completed fundraising for its first blockchain-focused venture capital fund</li>
 </ul>
 
</div>



Though Franklin Templeton is bullish on crypto as an asset class, the asset manager is seeking more regulatory clarity before offering ETFs focused on the segment.&nbsp;



The San Mateo, California-based company managed roughly $1.45 trillion in assets, as of April 30, and has clients in more than 150 countries.



“Franklin Templeton understands that cryptocurrencies represent various tokenomics of blockchain and distributed ledger technology systems,” Roger Bayston, Franklin’s head of digital assets, told Blockworks.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We believe they are an asset class that has a great deal of thematic tailwinds as industries begin to unlock the potential of blockchain and new types of digital assets are created.”</blockquote>



The firm has 55 ETFs trading in the US with combined assets of nearly $1.7 billion, according to ETF.com. Bayston said Franklin Templeton is monitoring regulations around ETFs and considering that delivery mechanism for providing clients exposure to important blockchain investment strategies.&nbsp;



Though competing asset managers, such as <a href="https://cms.blockworks.co/blackrock-lists-blockchain-etf-days-after-similar-fidelity-launch/" target="_blank" rel="noreferrer noopener">BlackRock</a> and <a href="https://cms.blockworks.co/fidelity-launches-metaverse-experience-in-tandem-with-new-etfs/" target="_blank" rel="noreferrer noopener">Fidelity</a>, recently launched ETFs focused on blockchain technologies, Franklin Templeton is still mulling the right time for an entrance.&nbsp;



“We expect to provide quality products when the regulatory landscape provides that opportunity for investors,” Bayston said.



LinkedIn job postings from last week indicate that Franklin Templeton is seeking an investment research analyst to join its crypto asset management team.&nbsp;



The analyst would cover assets such as bitcoin and ether, develop and maintain valuation models and keep executives informed of protocol regulatory, staking and business opportunities, according to the posting. They would also help develop and manage new products in the cryptoasset space.



The firm did not comment on other crypto-related roles that it could seek to fill.&nbsp;



<h3 class="wp-block-heading">Other involvement in crypto</h3>



Franklin Templeton revealed in <a href="https://www.sec.gov/Archives/edgar/data/1882656/000188265621000001/xslFormDX01/primary_doc.xml" target="_blank" rel="noreferrer noopener">a regulatory filing</a> in September that it was <a href="https://cms.blockworks.co/franklin-templeton-prepping-blockchain-fund/" target="_blank" rel="noreferrer noopener">prepping a venture capital fund</a> focused on the blockchain space. The document indicated that the firm had so far raised $10 million for the fund and was looking to raise an additional $10 million before launching.&nbsp;



Bayston confirmed that the company recently completed fundraising for the fund but did not comment about the fund’s specifics, such as its final size.&nbsp;



“Franklin Templeton is active in projects all across the lifecycle of blockchains, ranging from investment activity at the early stages where new protocols and companies building on those protocols are being built, to offering advice on various portfolio constructions of more mature and more widely adopted blockchains,” he said.&nbsp;



The fund group’s parent company <a href="https://www.prnewswire.com/news-releases/eaglebrook-advisors-raises-strategic-capital-from-franklin-templeton-301518638.html" target="_blank" rel="noreferrer noopener">made a strategic investment</a> in crypto separately managed account platform Eaglebrook Advisors in April.



Roger Paradiso, Franklin Templeton’s head of product solutions, said in a statement at the time that the firm would look to bring advised solutions within the asset class to its partner firms, advisors and clients.



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Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.