Franklin Templeton adapts money market funds for US stablecoin rules

Source: CryptoNewsNet Original Title: Franklin Templeton adapts money market funds for US stablecoin rules Original Link: Franklin Templeton has amended two Western Asset institutional money market funds (MMFs) to plug directly into the emerging US stablecoin regime and tokenized cash infrastructure rather than launching new crypto native products.

According to a release, Franklin Templeton is adapting the two long‑running Western Asset institutional funds so they can be used more directly in US GENIUS‑aligned stablecoin reserve structures and blockchain‑enabled distribution channels, without changing their status as Securities and Exchange Commission‑registered 2a‑7 MMFs.

The changes are designed to allow the funds to serve as regulated, government-backed collateral for payment stablecoins and other tokenized cash uses without altering their core regulatory status.

Retrofitting the MMFs for GENIUS‑ready stablecoin reserves

Franklin Templeton’s Western Asset Institutional Treasury Obligations Fund (LUIXX) invests exclusively in short‑term US government obligations and is structured to be compatible with GENIUS Act reserve requirements, positioning it as plug‑and‑play infrastructure for payment stablecoin treasuries and bank‑style issuers that need SEC‑registered, government‑only collateral.

Its Western Asset Institutional Treasury Reserves Fund (DIGXX), on the other hand, has added a blockchain‑enabled “Digital Institutional” share class on top of its existing 2a‑7 structure, intended to make it usable as 24/7, onchain collateral and cash management for tokenization platforms, custodians and broker‑dealers that want digital rails without moving into an unregistered vehicle.

How Franklin Templeton frames the stablecoin bet

Roger Bayston, head of digital assets at Franklin Templeton, stated that the company expects stablecoin reserves to be managed “in both tokenized and more traditional form,” and sees room for both exclusive and multi‑manager mandates as more financial institutions launch their own tokens.

He noted that several “significant products in the stablecoin market” are “backed by traditional high-quality short-term issuance through non-digitally native product structures,” including the recently launched FRNT stablecoin in the State of Wyoming, and the company sees opportunities to help such partners through its investment management expertise.

Franklin Templeton’s role, he said, is to manage reserves “in the product model [clients] prefer,” whether via bespoke portfolios or open‑end mutual funds.

Why retrofit instead of launch new funds?

Bayston cast the amendments as incremental rather than experimental, noting that Western Asset’s institutional Treasury fund only needed “relatively minor adjustments” to sit inside the GENIUS framework and complement Franklin Templeton’s existing onchain products.

In his view, many large clients still want familiar, SEC‑registered 2a‑7 wrappers as they plug into onchain distribution and collateral systems, so the company is extending a digital stack across a broader liquidity “suite” instead of forcing migration to new vehicles.

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 frontends.

Other asset managers pursuing similar strategies

Franklin Templeton is not alone in repositioning money funds for stablecoin reserves under the GENIUS Act.

BlackRock announced plans to modify a Treasury money market fund in October 2025, aimed at serving as an authorized reserve asset for US stablecoin issuers, tightening its investment mandate to short‑dated Treasurys and overnight repo (short‑term, secured funding), to align with the new federal framework.

BlackRock was already managing a bespoke government MMF for stablecoin reserves, as large asset managers increasingly see regulated cash funds as backend rails for tokenized dollars rather than purely retail cash products.