Franklin Templeton is adjusting its monetary funds to serve as regulated reserves of stablecoins and on-chain infrastructure, connecting traditional finance and blockchain technology with support from the GENIUS Act.
In the evolving landscape of the global financial industry, Franklin Templeton, one of the world's largest asset managers, has begun a strategic restructuring of its money market fund offering. The goal is to provide the necessary reserve infrastructure for stablecoins while strictly adhering to the GENIUS Act, the federal legislation that, starting in late 2025, establishes transparency and backing rules for digital currencies in the United States.
The asset manager has no plans to launch its own cryptocurrency. Rather, it seeks to leverage the funds it already manages to serve as collateral and a settlement method within a financial ecosystem increasingly connected to blockchain technology and supported by greater regulatory openness.
In this vein, the firm is focusing its efforts on two institutional funds managed by its subsidiary, Western Asset Management. Its plan involves linking these funds directly to stablecoin issuers and blockchain networks, adhering to the requirements of the GENIUS Act and the oversight of the Securities and Exchange Commission (SEC). With this initiative, Franklin Templeton reinforces its role within the financial sector, which seeks to bridge traditional finance with the ever-evolving digital environment.
Trade crypto assets securely on Bit2MeTraditional money market funds are making inroads into the world of stablecoins
The core of Franklin Templeton's strategy lies in updating two of its financial vehicles managed by Western Asset Management. The first is the fund LUIXX (Western Asset Institutional Treasury Obligations Fund)which has modified its investment policy to exclusively hold US Treasury bonds with maturities of less than 93 days. This adjustment is a direct response to the requirements of the GENIUS Act, which mandates that issuers of payment stablecoins back their assets with highly liquid, low-risk instruments.
By transforming LUIXX into a vehicle compliant with these regulations, the asset manager allows stablecoin issuers to use the fund as an SEC-supervised reserve management tool. This eliminates the opacity surrounding backing that plagued the sector in previous years.
The move, in general, reflects Franklin Templeton's clear vision for the future of digital finance. Instead of launching its own currency or token, the firm is positioning itself as a strategic partner that provides trust and professional custody to issuers within the ecosystem. Its goal is to combine the stability of the traditional financial market with the efficiency and traceability offered by blockchain technology.
As Roger Bayston, Director of Digital Assets at Franklin Templeton, explained, the strategy aims to integrate traditional funds into the blockchain, not to break with the current system, but to make it more efficient and accessible to a wider audience.
Enter and trade with regulated stablecoins“Traditional funds are already starting to integrate into the blockchain, so instead of questioning their capabilities, our goal is to make them more accessible and useful to many.”, said Bayston.
Greater operational efficiency through tokenization of the DIGXX fund
Additionally, the firm has strengthened the fund DIGXX (Western Asset Institutional Treasury Reserves Fund)This incorporates a class of digital shares that operate directly on blockchain networks. Thanks to this infrastructure, ownership of shares can be registered and transferred almost instantly, eliminating the restrictions of banking hours and offering a continuous settlement system. This model is especially valuable for stablecoin issuers, who rely on consistent and precise liquidity management to maintain the balance of their assets.
The impact of this innovation is visible in projects like FRNT, the first US state stablecoin, launched by Wyoming and backed by reserves managed by Franklin Templeton.
In an environment where companies like BlackRock and JPMorgan are driving their own tokenization initiatives, Franklin Templeton seeks to differentiate itself through an open architecture. This allows any regulated issuer to integrate its operations with liquid reserves recorded on the blockchain, ensuring that each digital unit issued has tangible and verifiable backing in accordance with federal standards.
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The GENIUS Act, the law that redefined the stablecoin market in the United States
The GENIUS Act, passed in 2025, became the new backbone of the stablecoin payment ecosystem in the United States. With this regulatory framework, Congress sought to provide certainty to a sector that had grown without a clear legal structure. The legislation establishes what types of assets can back a stablecoin and under what conditions each issuer must operate, with the goal of strengthening the stability and trust in these digital currencies that already perform functions similar to traditional money within the financial system.
Thanks to this law, institutions interested in issuing stablecoins can use money market funds as a reserve base, guaranteeing immediate liquidity and a more secure interaction with the dollar.
This model combines the flexibility of blockchain technology with the strength of the regulated financial system, paving the way for a new stage of integration between digital innovation and traditional US banking standards.
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