Franklin Templeton’s Innovations in Blockchain Finance
Franklin Templeton is taking significant strides in the realm of blockchain finance with enhancements to its Western Asset institutional money market funds, adapting them to better interface with the burgeoning sector of tokenized financial assets. The firm has announced revisions to two key funds that will enable them to support regulated stablecoin reserves in compliance with U.S. regulations and enhance their functionality on blockchain distribution platforms.
Updates to Key Funds
In a recent press announcement, the asset manager revealed updates to the Western Asset Institutional Treasury Obligations Fund and the Western Asset Institutional Treasury Reserves Fund, transforming them to accommodate essential functions for issuers under the recently enacted GENIUS Act. This legislative framework mandates stringent reserve conditions for stablecoin issuers and creates favorable grounds for 24/7 blockchain transactions and settlements for institutional distributors.
Matt Jones, who oversees Institutional Liquidity for Franklin Templeton, emphasized the firm’s commitment to innovation while effectively managing risk. He remarked, “Being an early adopter is only beneficial if done responsibly. These enhancements showcase our ability to aid institutions in transitioning to tokenized infrastructures with familiar products.”
Focus on U.S. Treasuries
The Institutional Treasury Obligations Fund (ticker: LUIXX) is now primarily focused on U.S. Treasuries with short maturities, specifically under 93 days, ensuring compliance with the GENIUS Act’s reserve obligations, which was enacted in 2025. With the growing adoption of regulated stablecoins—whose total market supply has reached over $310 billion—Franklin Templeton anticipates a rising demand for high-quality, short-duration collateral. Projections indicate that the stablecoin market could ascend to $2 trillion by 2030, driven by advancements in digital transactions and tokenization technology.
Digital Institutional Share Class
Moreover, the Western Asset Institutional Treasury Reserves Fund has added a Digital Institutional Share Class (DIGXX), facilitating blockchain-based tracking and transfer of share ownership by designated intermediaries. This innovation allows for near-instant settlement and round-the-clock transaction availability while maintaining the fund’s status as a conventional SEC-registered Rule 2a-7 money market fund according to the firm.
Roger Bayston, Franklin Templeton’s lead on digital assets, clarified that their goal isn’t to overhaul traditional mutual funds but to enhance institutional access to them. “Many traditional funds are exploring on-chain options; instead of questioning their potential, we are concentrating on improving their accessibility and efficiency,” he stated.
Market Perspectives
This announcement emerges amidst discussions about the potential for tokenized funds to disrupt the exchange-traded fund (ETF) industry. Bloomberg ETF analyst Eric Balchunas expressed skepticism on social media, arguing that while blockchain’s advantages may contribute to operational efficiency, they are unlikely to significantly impact the well-established ETF market. He noted that new ETF issuers have consistently increased for three consecutive years, fueled by a dynamic cycle of investment influx and innovation.
Balchunas contended that the tokenization phenomenon will likely remain a niche segment rather than a threat to the ETF ecosystem, remarking that “the idea that tokenization can easily transform this robust market is unrealistic.”
