Franklin Templeton Partners With Bybit for Tokenized Fund Collateral

Franklin Templeton has partnered with crypto exchange Bybit to expand access to tokenized money market funds, allowing eligible institutional investors to use fund shares as off-exchange collateral for crypto trading.

Under the partnership, Franklin Templeton will issue tokenized fund shares through its Benji Technology Platform. Qualified clients can pledge the assets through ByCustody, Bybit’s institutional custody service, and receive USDT or USDC credit lines for trading.

The structure keeps the underlying tokenized assets outside the exchange while Bybit recognizes their collateral value within its trading system. This allows institutional investors to access liquidity without selling their fund holdings, while continuing to earn potential yield from the underlying money market investments.

Franklin Templeton manages approximately $1.7 trillion in assets, while the tokenized money market fund associated with the initiative has roughly $686 million in net assets.

The arrangement follows an August 12 no-action letter from the U.S. Securities and Exchange Commission’s Division of Investment Management concerning an investment structure involving a Franklin OnChain Money Fund and U.S. government money funds. The SEC staff said it would not recommend enforcement action under the outlined conditions, although the letter did not constitute formal Commission approval.

ByCustody plays a central role by holding the tokenized fund shares rather than transferring them directly to Bybit. Investors can therefore use their holdings to secure stablecoin credit while maintaining exposure to income generated by the fund.

Bybit Global Head of RWA and TradFi Yoyee Wang said institutional investors are seeking more flexible collateral options. Franklin Templeton has already established similar off-exchange collateral arrangements with Binance and OKX.

The partnership is also expected to involve the Mantle network and broaden access to selected Franklin Templeton investment strategies. Sandy Kaul, Franklin Templeton’s Head of Digital Assets and Innovation, said the collaboration expands the Benji platform into another digital marketplace.

The initiative highlights growing convergence between tokenized real-world assets, institutional custody and cryptocurrency trading infrastructure as traditional asset managers increasingly adopt blockchain-based financial products.