Franklin Templeton Updates Money‑Market Funds to Serve Stablecoins and Blockchain Distribution
January 13, 2026 –
Asset‑management powerhouse Franklin Templeton, which oversees roughly $1.6 trillion in assets, announced enhancements to two of its Western Asset money‑market offerings that are intended to make the products more compatible with stable‑coin issuers and blockchain‑based distribution channels. The changes keep the funds within the U.S. Securities and Exchange Commission’s Rule 2a‑7 framework while adding features that align them with emerging digital‑finance standards.
What changed?
| Fund | Original structure | New feature | Intended user |
|---|---|---|---|
| Western Asset Institutional Treasury Obligations Fund | Broadly diversified short‑term Treasury and repo holdings | Revised portfolio to hold only U.S. Treasury securities with maturities of 93 days or less and Treasury‑backed repurchase agreements | Stable‑coin issuers looking for a compliant reserve asset |
| Western Asset Institutional Treasury Reserves Fund | Treasury‑only money‑market fund (no change to holdings) | Introduction of a “digital share class” that enables approved distributors to allocate shares via blockchain platforms | Institutional distributors wanting to offer a traditional money‑market product on‑chain |
Both funds remain traditional, SEC‑registered money‑market vehicles and are not tokenized. The adjustments focus on how the funds can be accessed and used rather than on the creation of on‑chain representations of the underlying assets.
Regulatory backdrop
The revisions are timed to coincide with the implementation of the GENIUS Act, legislation passed last year that provides a clear regulatory framework for stable‑coin reserve management. By tailoring the Treasury Obligations fund to meet the Act’s criteria—namely, holding only short‑dated Treasuries and Treasury‑backed repos—Franklin Templeton positions the vehicle as a “regulatory‑ready” reserve option for issuers that must demonstrate compliance with U.S. law.
Roger Bayston, head of digital assets at Franklin Templeton, told The Defiant:
“Updating these SEC‑registered funds to accommodate stable‑coin reserves and blockchain‑based distribution turns trusted liquidity products into usable infrastructure for tokenized markets.”
Industry context
Franklin Templeton’s move reflects a broader trend among conventional asset managers to embed themselves in the crypto‑finance ecosystem. The firm recently partnered with the state of Wyoming on FRNT, the first U.S. state‑issued stablecoin, which is managed by the company’s digital‑asset team. By extending its traditional money‑market expertise into the DeFi space, Franklin Templeton is aiming to capture a slice of the growing demand for compliant, low‑risk cash equivalents that can be deployed on‑chain.
Analysis
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Bridging the compliance gap – The Treasury Obligations fund’s tightened composition directly addresses the GENIUS Act’s reserve‑asset requirements, offering stable‑coin issuers a ready‑made, SEC‑compliant cash‑equivalent. This could reduce the need for issuers to construct bespoke reserve pools, speeding up time‑to‑market.
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Distribution innovation without tokenization – Introducing a digital share class allows institutional distributors to integrate a traditional money‑market product into blockchain‑based platforms while keeping the underlying securities off‑chain. This hybrid approach sidesteps many of the legal and custodial complexities associated with full tokenization.
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Risk‑adjusted liquidity – By limiting holdings to ultra‑short‑term Treasuries and Treasury‑backed repos, the updated fund maintains high liquidity and minimal credit risk—attributes that are essential for stable‑coin backing but also attractive to conservative institutional investors exploring on‑chain avenues.
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Competitive positioning – Few large asset managers have publicly aligned existing SEC‑registered funds with DeFi use cases. Franklin Templeton’s proactive stance may give it an early‑mover advantage, especially as regulators continue to clarify the treatment of crypto‑linked assets.
- Potential limitations – The funds remain non‑tokenized, which means that on‑chain settlement still depends on third‑party custodians or bridge solutions. Additionally, the digital share class is limited to “approved distributors,” potentially restricting broader market access until the ecosystem matures.
Key takeaways
- Regulatory alignment: The Treasury Obligations fund now meets the GENIUS Act’s reserve‑asset criteria, offering a compliant liquidity source for stable‑coin issuers.
- Blockchain‑ready distribution: A new digital share class on the Treasury Reserves fund enables on‑chain allocation without tokenizing the underlying securities.
- No tokenization: Both funds continue to operate as traditional SEC‑registered money‑market products; the updates focus on usage and distribution mechanisms.
- Strategic expansion: The initiative complements Franklin Templeton’s recent involvement in state‑backed stablecoins (FRNT) and underscores a wider shift among legacy managers toward DeFi infrastructure.
- Institutional appeal: By preserving strict liquidity, credit quality, and risk standards, the funds aim to attract conservative institutions seeking regulated exposure to digital‑finance ecosystems.
Franklin Templeton’s adjustments illustrate how established financial institutions are reconfiguring existing products to meet the evolving demands of the digital‑asset market, offering a blend of regulatory certainty and blockchain accessibility.
Source: https://thedefiant.io/news/tradfi-and-fintech/franklin-templeton-preps-money-market-funds-for-defi
