Franklin Templeton Asks SEC: Does Tokenizing the Money Fund Count as 'Investing' It? 💼

Franklin Templeton representatives met with the U.S. Securities and Exchange Commission's Crypto Task Force to seek clarity on how the agency's Innovation Exemption interacts with the Investment Company Act of 1940, according to an SEC memo. The $1.8 trillion AUM financial services firm was represented by Mike Muir, Navid Tofigh, and Sarah Bessin, with the proposed agenda covering the firm's digital assets business, its FOBXX government money market fund, and the Innovation Exemption's potential conflicts with the 1940 Act.

During the meeting, Franklin Templeton asked the Crypto Task Force whether relief from Section 22(d) and Rule 22c-1 is necessary for a tokenized money market fund share to trade on a tokenized securities venue. The firm also sought guidance on whether relief is required for a liquidity pool that is not treated as an investment company, and it raised questions involving tokenized National Market System (NMS) ETFs.

The discussion forms part of a broader dialogue between traditional asset managers and the SEC as regulators evaluate frameworks for blockchain-based financial products. Tokenized money market funds, which represent on-chain versions of conventional funds like FOBXX, have been an area of focus as firms explore distributing fund shares via distributed ledger technology. The interaction between the Innovation Exemption and existing securities statutes, including the 1940 Act, remains a key question for issuers seeking to bring these products to market.

The Innovation Exemption referenced in the meeting is a proposed regulatory framework intended to provide clarity for digital asset offerings and blockchain-based securities, though its final form and scope have not been confirmed by the SEC. The Crypto Task Force, established to coordinate the agency's approach to crypto-related policy, has been engaging with multiple industry participants on similar questions. Franklin Templeton's outreach reflects the same pattern of engagement, with the firm documenting its positions through formal memos and meeting summaries. The SEC has not publicly announced a timeline for additional guidance on tokenized fund structures or the 1940 Act issues raised in the meeting.