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ZEC $1,289 Franklin Templeton Explores SEC Relief for Tokenized Fund Trades
The asset manager met with SEC crypto task force staff on Oct. 9 to discuss regulatory exemptions for tokenized fund trading via blockchain venues.
Key takeaways
- Meeting held Oct. 9. Franklin Templeton met with SEC Crypto Task Force staff on October 9 to discuss tokenized fund trading rules.
- AUM is $1.79 trillion. Franklin Templeton reported preliminary assets under management of $1.79 trillion as of September 30.
- No relief granted yet. The SEC meeting memorandum does not state that the Commission reached a decision or granted the discussed relief.
What happened
Franklin Templeton met with U.S. Securities and Exchange Commission (SEC) Crypto Task Force staff on October 9 to discuss regulatory requirements for trading tokenized money market funds and exchange-traded funds (ETFs) via blockchain venues. The meeting addressed legal questions around fund pricing, liquidity provider fees, and the classification of pooled assets used in these trades. The global investment manager has preliminary assets under management of $1.79 trillion as of September 30.
The asset manager's proposed agenda covered trading tokenized money market fund shares against tokenized National Market System (NMS) stocks via blockchain trading pairs, and whether liquidity providers could charge service fees for these arrangements. For tokenized ETFs, the discussion included potential trading pairs with tokenized stocks, permitted payment stablecoins, or tokenized money market funds. The agenda also raised questions about whether liquidity pools themselves fall under investment company regulations, and if the interests issued to liquidity providers qualify as securities.
Why it matters
The discussions shift focus from simply recording fund shares on blockchain to the operational rules governing tokenized funds in trading environments. The SEC's September 17 innovation exemption already allows limited tokenized stock trading via blockchain pools for approved participants, subject to conditions including trading volume limits, equivalent shareholder rights, auditable public smart contracts, and trading halts tied to the underlying stock's primary exchange. Franklin Templeton's questions seek clarity on whether additional exemptions are needed for fund-specific trading structures and fee models not covered by the existing innovation exemption.
What is still unclear
- The SEC meeting memorandum does not indicate that the Commission reached a decision or granted any of the requested relief for tokenized fund trading arrangements.
Questions readers ask
What regulatory exemptions is Franklin Templeton seeking for tokenized funds?
The asset manager is seeking clarity on whether exemptions from Investment Company Act pricing rules and investment company classification are needed for tokenized fund trading via blockchain liquidity pools and tokenized securities venues. It also asked about relief for liquidity provider service fees.
Does the SEC innovation exemption cover tokenized fund trading?
The SEC's September 17 innovation exemption only covers qualifying blockchain venues and liquidity providers for limited tokenized stock trading, with conditions including volume limits and trading halts. It does not explicitly address fund-specific pricing rules or liquidity pool classification for tokenized money market funds and ETFs.
What is a tokenized securities venue?
A tokenized securities venue (TSV) is a permissioned platform for trading tokenized versions of securities, which the SEC distinguishes from a national securities exchange for regulatory purposes.
