Franklin Templeton Aligns Money Market Funds with Tokenized Finance under GENIUS Act

Franklin Templeton has restructured two institutional money market funds to operate within the evolving tokenized finance and stablecoin markets. The firm adjusted the Western Asset Institutional Treasury Obligations Fund and the Western Asset Institutional Treasury Reserves Fund to align with reserve requirements under the GENIUS Act and blockchain-based distribution systems according to the firm's announcement.

The changes are designed to make these funds usable by stablecoin issuers and financial intermediaries without altering their status as SEC-registered money market vehicles. The Treasury Obligations Fund now holds only short-term U.S. Treasuries with maturities of 93 days or less, making it compliant with the federal framework enacted in July 2025.

The Treasury Reserves Fund introduced a Digital Institutional Share Class, enabling approved intermediaries to use blockchain for recording and transferring share ownership. This allows for faster settlement, round-the-clock transactions, and integration with digital asset systems as reported.

Why Did This Happen?

Franklin Templeton's move reflects institutional demand for regulated liquidity products compatible with digital infrastructure. Roger Bayston, the firm's head of digital assets, noted that the updates aim to make traditional funds more accessible and useful within the tokenized finance ecosystem according to the firm's statement.

The firm has been expanding its digital capabilities since 2018, investing in tokenization research and blockchain-based fund infrastructure. These updates align with broader industry trends where institutions seek to modernize existing products rather than replace them as industry analysis shows.

How Did Markets React?

The firm reported strong financial performance in Q4 2025, with assets under management rising 3.1% to $1.66 trillion. Franklin Templeton emphasized its role as the first global asset manager to deliver native on-chain mutual fund tokenization according to earnings reports.

The stock fell 4.13% in pre-market trading despite exceeding earnings forecasts. Analysts attributed this to market skepticism around tokenized finance and broader macroeconomic concerns as market data indicates.

What Are Analysts Watching Next?

Franklin Templeton's strategy of retrofitting traditional funds for blockchain use has drawn attention from investors and regulators. The firm's approach is seen as a balanced way to meet demand for digital finance without overexposing itself to speculative risks .

The firm's ability to maintain its regulatory status while integrating blockchain technology is being closely monitored. This approach could set a precedent for how traditional asset managers navigate the transition to tokenized markets according to industry analysis.

The success of the updates will depend on how quickly institutional clients adopt the new capabilities. The firm's focus on government-backed collateral and operational discipline may help differentiate it from more speculative crypto-native products as the firm's update notes.

Franklin Templeton's digital strategy also includes the recent launch of a tokenized money market fund in Hong Kong. These moves suggest the firm is positioning itself as a key player in the hybrid financial infrastructure of the future according to the firm's announcement.