Ep. 750 The Institutional Crypto Playbook with Franklin Templeton

Franklin Templeton’s digital-asset interest grew after Tony Peacore saw Figure use distributed ledger technology for mortgage-loan origination around 2017 or 2018. He saw an opportunity to cut processing time and repetitive database checks, with faster settlement and distributed trust as potential efficiencies. That interest led to Benji, Franklin’s tokenized money market fund, launched in 2021 after beginning as an experiment. Peacore called it one of the strongest product-market fits he sees for real-world assets.

Benji is available across more than eight protocols and more than eight chains, in public and private variations and across several jurisdictions. Franklin took a regulatory-first approach to tokenizing fund shares and worked with the SEC on investor-asset protections. Peacore said the SEC required fallback records, so Franklin runs validators on Stellar to maintain a controlled copy of the decentralized database. The retail app lets users connect an account and subscribe in about 10 minutes, according to the discussion.

The fund’s return fluctuates; one speaker described it as being in the “T-billish neighborhood” but did not give a specific rate. Institutions also use Benji to seek yield on stablecoins held in corporate treasuries that otherwise earn no interest. Franklin is developing a framework to advise clients on digital-token value, though Peacore said the work is early-stage and valuation depends on each token’s fundamentals. The firm starts by examining how a token participates in value created by its protocol, or “value accrual”; fees paid in ETH or Solana are examples, but protocols and tokens differ in their foundations and revenue.

Franklin offers Bitcoin, Ethereum, multi-token, and Solana exchange-traded products, with staking connected to its Solana product. A speaker said the firm had “I think” five ETPs. The multi-token product offers market-cap-weighted exposure, while Peacore said active management can take views on which assets may outperform rather than simply track the market portfolio. He described Bitcoin as a store of value and the most liquid anchor of the digital-asset base, while distinguishing it from layer-1 networks, apps, and layer-2 networks that may have protocol revenue.

Peacore said businesses are being built on Ethereum and Solana, and Franklin sees opportunities to bring clients venture-capital investments in early-, mid-, and late-stage crypto companies. Franklin Crypto is building the capabilities and breadth needed by large clients, with a substantial active-management component that combines venture or token exposure in risk-managed portfolios tailored to clients. Peacore also said Franklin had recently brought in a team described as “250,” adding practitioner expertise.

Franklin had worked with a consortium of well-known names on a tokenized T-bill trade in the preceding three or four weeks. Peacore expects tokenized real-world assets to create value, tokens to participate in that value, and DeFi to develop ways to engage with those assets; he said institutional inbound activity was substantial, particularly around building. He cautioned that crypto volatility will not shrink, even if it is temporarily compressed, and said investors need to look through it and capitalize on it.