Two Franklin Templeton tokenized funds, the Franklin Bitcoin ETF (EZBC) and the Franklin OnChain US Government Money Fund (FOBXX), have integrated a verification system using Jiritsu network on Avalanche, according to Dec. 2 statements from Jiritsu co-founder Jacob Guedalia.
The new system will allow asset managers to issue tokens backed by the funds’ shares, paving the way for these tokens to become available to retail investors.
The FOBXX fund has been traded on various blockchain networks since 2021 in the form of the BENJI token, which represents its shares on the blockchain. It is currently available on the Stellar, Polygon, Arbitrum, Base and Avalanche networks.
However, it can only be traded by registered asset managers. Retail investors are currently not able to invest in the fund directly, using a standard Web3 wallet.
According to Geudalia, the new verification system is a step toward eliminating this limitation, as it will allow asset managers to issue derivative tokens backed by BENJI, but with blockchain verification to ensure that no tokens are minted without proper backing. He said:
“If you’re an asset manager and you’re holding BENJI and I buy a token that represents a fractional ownership of your portfolio of [those] BENJI tokens, what it does is it verifies that the money is there [...] And we have a control mechanism, a policy mechanism, that says ‘you cannot mint that token unless you've got something to back it up.’”
The verification system uses Jiritsu’s multiparty computation (MPC) network to ensure this policy is followed.
He expects retail tokens backed by the fund to become available “before the end of the year.” Investors will need to pass KYC verification through a web portal to access the tokens, but they will be available to most investors, not merely to asset managers. The tokens will also become usable within decentralized finance (DeFi) applications over the long run.
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Offering retail versions of the tokens will help to prevent friction for investors, Guedalia said. Suppose an investor is holding shares of a Treasury bond fund in a brokerage account and wants to invest in a DeFi application. In that case, they need to first convert their interest-bearing shares into non-interest-bearing stablecoins, then convert them again into interest-bearing blockchain assets.
Having tokens on the blockchain that already represent these shares will help to reduce this friction. “You’ve got this kind of velocity or lack of friction that’s taken out of the system by moving,” he said.
In addition, investors who cash out of Bitcoin or other cryptocurrencies can park their wealth in these assets instead of stablecoins, allowing them to earn yields while they wait for other investment opportunities.
Franklin Templeton funds are not the only ones being tokenized on blockchain networks. BlackRock’s BUIDL money market fund is also available on multiple networks and ONDO’s USDY token is a yield-bearing token available to retail investors and backed by US Treasurys.
Related: Ondo taps LayerZero to take USDY multichain