Franklin Templeton has modified Western Asset’s two institutional money market funds (MMFs) to connect directly to the emerging U.S. stablecoin regime and tokenized cash infrastructure, rather than launching new crypto-native products.
According to a release shared with Cointelegraph, Franklin Templeton is adapting two of its long-running Western Asset institutional funds for more direct use with a stablecoin reserve structure and blockchain-enabled distribution channel aligned with US GENIUS, without changing their status as SEC-registered 2a-7 MMFs.
This change is intended to allow funds to serve as regulated government-backed collateral for the use of payment stablecoins and other tokenized cash without changing their core regulatory status.
Franklin Templeton fixes money market funds. Source: Frankin Templeton
Modification of MMF to prepare stablecoin for GENIUS
Franklin Templeton's Western Asset Institutional Treasury Debt Fund (LUIXX) invests exclusively in short-term U.S. government debt, is structured to meet the reserve requirements of the GENIUS Act, and is positioned as a plug-and-play infrastructure for SEC-registered, government-only collateralized settled stablecoin government and bank-style issuers.
Meanwhile, the company's Western Asset Institutional Treasury Reserves Fund (DIGXX) adds a blockchain-enabled “digital institution” share class to its existing 2a-7 structure, with the aim of making it usable as 24/7 on-chain collateral and cash management for tokenization platforms, custodians, and broker-dealers that require digital rails without moving to unregistered vehicles.
Related: XRP rises 8% as Franklin Templeton Grayscale ETF begins trading
How Franklin Templeton puts together a bet on stablecoins
Roger Bayston, Head of Digital Assets at Franklin Templeton, told Cointelegraph that the firm expects stablecoin reserves to be managed in “both tokenized and more traditional forms,” and believes there is scope for both exclusive and multi-custodian mandates as more financial institutions issue their own tokens.
He said that several “important products in the stablecoin market,” including the recently launched FRNT stablecoin in Wyoming, “are underpinned by traditional, high-quality short-term issuance with non-digital native product structures,” and that the company sees an opportunity to support these partners through its investment management expertise.
He said Franklin Templeton's role is to manage reserves “in the product model[that clients prefer],” such as bespoke portfolios or open-end mutual funds.
Why renovate rather than launch a new fund?
Bayston noted that only “relatively minor adjustments” are needed for Western Asset's institutional treasury funds to fit within the GENIUS framework and complement Franklin Templeton's existing on-chain offering, noting that the modifications are incremental rather than experimental.
In his view, many large customers still want the familiar SEC-registered 2a-7 wrapper when connecting to on-chain distribution and collateral systems, so the company is expanding its digital stack across a broader liquidity “suite” rather than forcing a transition to a new vehicle.
Related: Franklin Templeton expands Benji tokenization platform to Canton Network
Rather than tying the new digital share class to a single collateral or tokenization platform, Franklin Templeton plans to support access through multiple “trusted partners” as banks, broker-dealers and other intermediaries roll out their own blockchain-enabled front ends.
Other asset managers pursuing similar strategies
Franklin Templeton is not alone in redeploying funds from stablecoin reserves under the GENIUS Act.
BlackRock announced plans to amend the Treasury Money Market Fund in October 2025 to serve as an authorized reserve asset for U.S. stablecoin issuers, increasing its investment obligations in short-term Treasury and overnight repos (short-term collateral funds) to align with the new federal framework.
Large asset managers are increasingly viewing regulated cash funds as tokenized dollar backend rails rather than pure retail cash products, and BlackRock was already managing a bespoke government MMF for Circle's USDC reserve.
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