Franklin Templeton Turns Tokenized Fund Shares Into Bybit Margin

Franklin Templeton and Bybit said on September 28 that eligible clients can pledge tokenized money market fund shares as off-exchange trading collateral. The shares are issued through Franklin’s Benji Technology Platform, pledged at ByCustody, and mirrored on Bybit as USDT or USDC credit, while the fund itself stays in custody and keeps paying yield. Franklin Templeton manages $1.7 trillion; Bybit says it has more than 80 million users.

The deal does not list a new coin. It lets a regulated government money fund do a second job as margin, which is the part that changes how trading books get funded.

Off-Exchange Shares, On-Exchange Credit

Bybit’s tokenized fund shares as off-exchange collateral program is a pledge-and-mirror setup, not a deposit into the exchange’s wallets. Clients keep legal title in custody. Bybit records a matching value inside its trading system and extends a stablecoin credit line against that value. If the exchange failed, the design is that the fund shares would still sit at ByCustody rather than in a pooled hot wallet.

HOW THE PLEDGE WORKS

• The issuance: Franklin issues the shares on the Benji Technology Platform, its blockchain-linked transfer-agency stack, and one share of FOBXX equals one BENJI token.
• The pledge: An eligible investor posts those shares through ByCustody, which Bybit describes as an institutional-grade custody platform.
• The mirror: Bybit reflects the pledged value in its trading environment and can grant USDT or USDC credit lines against it.
• The yield: The underlying money-market holdings stay off the exchange, so the client can keep collecting the fund’s income while the same position backs trades.

The shares never have to be sold to raise trading cash, which is the operational point of the structure. What moves is a claim Bybit has agreed to accept. The government paper stays where the transfer agent already records it.

By expanding the range of high-quality collateral available through our off-exchange infrastructure, we are helping clients deploy capital more effectively while maintaining exposure to trusted, regulated investment products.

Yoyee Wang, Global Head of RWA and TradFi at Bybit, September 28 release

Sandy Kaul, Franklin Templeton’s head of digital assets and innovation, said the Benji hookup gives institutions “a trusted venue to put regulated, yield-bearing assets to work in digital markets.” Franklin Digital Assets posted the same announcement on X.

Building with @Bybit_Ins.

Bybit and Franklin Templeton Form Strategic Collaboration to Expand Access to Tokenized Investing

The wider collaboration launches with a new off-exchange collateral program that unlocks trading liquidity for institutional clients, alongside… pic.twitter.com/tjgglM0YwQ

— Franklin Templeton Digital Assets (@FTDA_US) September 28, 2026

Bybit Joins OKX and Binance on the Same Fund

Bybit is not the first venue to treat Benji shares this way. On April 10, 2025, OKX and Standard Chartered launched a collateral mirroring programme with Standard Chartered under Dubai’s VARA framework, with Franklin Templeton as the first money-market manager in the lineup and Brevan Howard Digital among the first firms to onboard. Standard Chartered holds the assets in the Dubai International Financial Centre; OKX’s VARA entity manages the collateral. Franklin and Binance then switched on a matching model on February 11, 2026, with Ceffu as the custody layer and the share value mirrored inside Binance’s trading books.

THREE VENUES, ONE COLLATERAL PATTERN

Seventeen months after the OKX pilot, the same fund-share design now reaches three large crypto platforms. Each deal uses a different custodian, which matters if a client wants to spread venue risk without selling the underlying paper. The post-FTX lesson in this structure is blunt: institutions will post T-bill funds as margin if those funds never sit on the exchange.

FOBXX Held $686.64 Million at August’s Close

The product behind the tokens is the Franklin OnChain U.S. Government Money Fund, ticker FOBXX, a Rule 2a-7 government money market fund that launched on April 6, 2021. It invests at least 99.5% of assets in U.S. government securities, cash, and repurchase agreements fully backed by government securities or cash, and it seeks a stable $1.00 net asset value. Income does not show up as a rising share price. New BENJI tokens are minted and dropped into holders’ wallets, including on days when traditional transfer agents are closed.

FOBXX AT A GLANCE

• Net assets: Franklin reports $686.64 million in net assets as of August 31, 2026.
• Seven-day yields: As of September 25, 2026, the 7-day current yield was 3.71% and the 7-day effective yield was 3.77%, both with and without the fee waiver.
• Price and liquidity: NAV was $1.0000 as of September 25, 2026, with daily liquid assets at 61.45% and weekly liquid assets at 68.81%.
• Portfolio clock: Weighted average maturity was 32 days and weighted average life was 108 days as of September 24, 2026. The net expense ratio is 0.20% (gross 0.22% as of August 1, 2026), with the contractual cap running to July 31, 2027. S&P rates the fund AAAm; Fitch rates it AAAmmf.

Over the year to August 31, 2026, total return was 3.69%, which is a backward-looking figure and is not the same number as the 7-day current yield. For a trading desk, the live yield is the one that competes with leaving USDT idle as margin. A client who can keep 3.71% coming in while drawing a stablecoin line is being paid to hold the buffer that used to earn nothing on an exchange.

Benji uses public blockchains as part of the official ownership record, with Franklin Templeton Investor Services still in control of the master file, including corrections, freezes, and migrations. The September 28 release does not name which Benji share classes, chains, or wallets ByCustody will accept on day one.

August’s SEC Letter Is a Different Track

Some write-ups of the Bybit deal folded in a U.S. Securities and Exchange Commission staff letter from mid-August as if it blessed crypto-exchange collateral. It did not. On August 12, 2026, the Division of Investment Management issued a staff no-action letter dated August 12 under section 17(f) of the Investment Company Act of 1940 and Rule 17f-2. The request came from Franklin’s own U.S. registered funds, which want to hold FOBXX for cash management, including cash balances and securities-lending collateral, through an affiliated transfer-agent arrangement that cannot meet the old physical-vault paragraphs of the self-custody rule.

Staff said they would not recommend enforcement action if Franklin Templeton Investor Services acts as custodian for those affiliated holdings, subject to 12 operational conditions. Those include board approval and annual review, a separate Stellar wallet for each investing fund, daily reconciliation of confirmations, and at least three independent public-accountant verifications each fiscal year, two of them unannounced. The letter cites a September 24, 1992 no-action position that already allowed affiliated book-entry share arrangements. Taylor Evenson, senior counsel in the division, signed the response. The text is explicit that it is a staff view, not a Commission rule, and that it “has no legal force or effect.”

The letter’s practical effect sits inside Franklin’s fund complex: other Franklin funds can park cash in the same onchain government money fund that Bybit is now willing to treat as mirrored margin. That is a distribution channel into the $1.7 trillion complex, and it is separate from Bybit’s credit lines. The SEC staff did not review haircuts, liquidation rights, or ByCustody.

What Bybit and Franklin Have Not Disclosed

The September 28 release is a commercial announcement. It does not publish the terms that decide whether the credit line is cheap enough to use.

WHAT WE KNOW

• The structure: Benji shares are pledged at ByCustody, stay off Bybit, and are mirrored as USDT or USDC trading credit.
• The yield claim: Clients can keep earning the fund’s income while those shares support trading activity.
• The second track: Bybit and Franklin also described a tokenized wealth product on Bybit and the Mantle chain for wallet-based investors, with details to come separately, plus education programs on goals-based investing and diversification.

WHAT IS UNCONFIRMED

• The credit math: Haircuts, loan-to-value ratios, borrowing rates, position limits, and how a default or a gap in the fund’s $1.00 NAV would be closed.
• The perimeter: Eligible jurisdictions, which share classes qualify, and which wallets or chains ByCustody will take.
• The Mantle product: Share classes, fees, and a launch date for the wallet-based strategies.

Those blanks are where the risk lives. Someone has to mark the pledged shares when crypto prices jump, and someone has to liquidate them if a client’s Bybit book blows through the credit line. A government money fund can normally meet redemptions at $1.00 on a business-day cycle. Crypto margin calls do not wait for that cycle. In a violent depeg of USDT or USDC, the ugly race is between the fund’s redemption queue and the exchange’s liquidation engine, and neither firm has said which clock wins.

Idle Stablecoin Margin Meets a Paying Rival

For years the default institutional buffer on a crypto venue was a stablecoin sitting in an account earning nothing, or a T-bill fund that had to be sold before the proceeds could trade. The Bybit hookup, stacked on the OKX and Binance versions, attacks both habits at once. The desk can keep FOBXX’s 3.71% 7-day current yield working in custody and still pull USDT or USDC to trade, which makes idle exchange cash look expensive even before anyone discusses basis trades.

Bybit co-founder and CEO Ben Zhou said on September 29 that the tie-up makes it easier for institutions “to put regulated, yield-bearing assets to work onchain,” and that wallet investors would get “direct access to professionally managed, regulated strategies.” The second half still has no term sheet. Until Mantle’s product is named, the live piece of the deal is the credit line against Benji shares, and that line is only as good as the unpublished haircut.

Three venues now treat the same tokenized government money fund as margin they do not hold. The fund’s August net assets were $686.64 million, a thin slice of Franklin’s $1.7 trillion, but the plumbing is built for the shares to be reused rather than for the fund to be large. The next figure that matters is not another partnership photo. It is the LTV ByCustody and Bybit actually assign when someone tries to draw the line.

Disclaimer: This article is news reporting and analysis of a commercial partnership and a related SEC staff letter. It is for information only and is not investment, trading, legal, or tax advice, and it is not an offer or solicitation to buy or sell FOBXX, BENJI tokens, USDT, USDC, or any other security or crypto-asset. Readers should consult a licensed financial adviser, broker, or attorney who can review eligibility, custody, and collateral terms for their jurisdiction before pledging fund shares or drawing exchange credit. Yields, net assets, program rules, and regulatory positions are those published by the cited firms and the SEC staff as of the dates named above and can change.