Tokenized money market funds: The bridge to a new financial infrastructure

In many ways, a tokenized money market fund is like a stablecoin. It seeks to maintain a net asset value of $1.00 per share, is transferable wallet-to-wallet, can be posted as collateral on most crypto exchanges, and offers a direct on- and off-ramp to the traditional banking and financial system.

Yet, unlike stablecoins, tokenized money market funds are regulated securities, can pay yield directly to shareholders, and are only available to vetted participants that have passed KYC/AML checks. Moreover, the fund can only invest in a certain subset of assets that are detailed in the prospectus. There is complete transparency into the underlying holdings of the fund, assets are placed into safe keeping with third-party custodians, and investors are provided with daily reporting. These features are seen as offering better protection for investors over stablecoins, and as such, do not require the same over-collateralization for investors posting TMMFs as collateral.

Advancing the utility of the MMF construct

Since 2017, Franklin Templeton has been building The Benji Technology Platform, our proprietary blockchain-integrated stack designed to facilitate trading, management, and administration of token-based investments. The platform is available as a white label technology for banks or asset managers to tokenize securities, or via one of several tokenized money market funds launched by Franklin Templeton for a variety of global institutional and retail use cases. Using this platform, Franklin Templeton launched the world’s first US-registered mutual fund in 2021 using blockchain-integrated technology to process transactions and record share ownership. In 2024 the firm also leveraged the Benji Technology Platform to launch the first fully tokenized UCITS fund in Luxembourg, and secured regulatory approval to launch the first retail tokenized fund in Singapore in 2025.

The technology advancements available through the Benji Technology Platform have allowed Franklin Templeton to build never-before-available features and functionality, offering significant enhancements and new forms of utility onchain, including:

• A solution to allow KYC compliant, permissioned wallet-to-wallet transfers on supported blockchain networks, as well as functionality to allow the purchase or redemption of tokenized securities using stablecoins
• Instantly recorded changes in tokenized security ownership, rather than waiting to update the shareholder ledger on the next business day. Wallet-to-wallet transfers of tokenized securities can happen 24 hours a day, 7 days a week, 365 days a year
• Intraday yield payments: dividends calculated precisely, down to the second, if a tokenized asset is transferred throughout the day
• Yield that can be distributed to shareholders each calendar day, including weekends and holidays
• Claw-back or replacement of tokenized securities moved illicitly or lost.
• Self-custody of tokenized investments, so users can manage their own hot or cold wallets

These new capabilities mark a significant advancement in the utility of tokenized securities, and with the money market fund construct in particular. They democratize investors’ ability to access and manage their assets, allowing for assets to be loaned, borrowed, staked, and utilized in liquidity pools. They eliminate the restrictions of having to wait for a 24-hour or longer settlement cycle, enabling securities to move at the speed and with the ease of money and be used as a form of payment or funding. With the programmable capabilities available on the Benji Technology Platform, the TMMF construct can now support new use cases in supply-chain management, trade financing, and enterprise resourcing that automate the release of payments based on specific data triggers within embedded smart contracts.

These functions demonstrate the power of using blockchain, tokenization, and digital wallets for re-wiring the global financial system.

Navigating the nuance

To be clear, however, not all TMMFs are the same, and not all tokenization technologies can enable the same functionality.

• Some leading TMMF issuers deliver tokenized securities solely as a back-up record of ownership. The asset that sits in a user’s digital wallet is nothing more than a digital receipt. Actual ownership is still conveyed via a traditional fund share and recorded in a typical account structure kept by the transfer agent on an old-school mainframe-based system. Such TMMFs cannot convey the functionality promised by the blockchain. In some cases, the tokenized security may not even provide any native rights to the holder. Changes in ownership are not officially recorded until the off-chain ledger is updated, creating operational risks. For example, purchases made on a Friday may show up as an assets in the user’s wallet, but the holder does not officially own the fund until the following Monday, or even Tuesday if there is a 3-day holiday. Yields on these funds are paid into off-chain accounts in fiat currency, not into digital wallets via new token issuance.
• Another set of TMMFs focus on short duration strategies that look to optimize yield by taking more risk in the portfolio. These funds often invest in corporate debt that is less secure than government issued securities and would be considered more akin to “prime” rather than “government” money market funds. Such investments are not seen as offering the same consumer protection and have higher inherent amounts of risk and a greater likelihood of seeing variance in their stated net asset value.
• A third category of offerings often included in measurement of TMMFs is directly tokenized government bills or notes. These are single asset offerings that lack the benefit derived from active management of the underlying holdings to enhance the yield potential.

What the Benji Technology Platform offers is different. Understanding the nuances of the various offerings grouped under the TMMF category is a critical starting point for ensuring the optimal exposure and use of these new instruments. What is clear, however, is that the advances being made by moving this stalwart staple from the current financial ecosystem onto new rails is that the TMMF construct is likely to not only remain a key piece of industry infrastructure but take on new dimensions and importance.

Franklin Templeton’s pioneering work on tokenization and the next-generation capabilities offered though our proprietary Benji Technology Platform are redefining investment operations, not just for our firm but for the industry. The power of emerging use cases is likely to speed the adoption of these new technologies and advance the shift from today’s account-based economy to an increasingly dominant wallet-based financial ecosystem.