Franklin updates 2 US bond funds! Preparing to connect with the tokenization market, compliant with legislation and reserve regulations

Franklin Templeton upgrades two money market funds to align with blockchain and the 《GENIUS Act》, focusing on stablecoin reserves and real-time settlement.

Traditional finance shifts toward tokenization: two major funds update simultaneously to connect with blockchain

Global asset management giant Franklin Templeton announced on January 13, 2026, a deep update to two key institutional money market funds (MMFs) managed by its subsidiary Western Asset Management.

This strategic move aims to enable these assets to seamlessly connect with blockchain financial markets and tokenized asset environments, reflecting how traditional financial giants are actively positioning themselves in the rapidly growing tokenized assets and compliant stablecoin markets. The updated funds are:

• “Western Asset Institutional Treasury Obligations Fund” (LUIXX);
• “Western Asset Institutional Treasury Reserves Fund” (DIGXX).

Roger Bayston, Head of Digital Assets at Franklin Templeton, stated that the migration of traditional funds onto the chain is an inevitable trend. The company’s core goal is to improve the accessibility of these funds, making them more practical for a broad range of investors.

Image source: CNBC Franklin Templeton Head of Digital Assets Roger Bayston

In the current market environment, the total supply of stablecoins has surpassed 310 billion, with research predicting this digital figure will soar to about 2 trillion by 2030. As stablecoins are increasingly used in payments, clearing, and collateral platforms, the market demand for high-quality, regulated liquidity assets is also rising.

Franklin Templeton emphasizes that despite these future-oriented technological updates, these two funds still maintain their status as SEC-registered 2a-7 money market funds, with no changes to their portfolios or regulatory frameworks.

Bayston believes that many large institutional clients still prefer to use familiar SEC-registered packaging when accessing on-chain issuance and collateral systems. Therefore, the company chooses to expand digital functionalities within its existing liquidity product portfolio rather than forcing clients to migrate to entirely new investment tools. This approach reflects the company’s effort to promote financial innovation while meeting the high standards of compliance and security required by institutional clients.

LUIXX Transforms into Stablecoin Reserves: Adjusting Asset Allocation in Response to the 《GENIUS Act》

The update for the LUIXX fund mainly focuses on complying with the reserve requirements stipulated in the U.S. 《GENIUS Act》, established in July 2025. According to this new legislation, compliant stablecoin issuers must strictly oversee the quality and liquidity of their reserve assets.

To this end, LUIXX has adjusted its investment strategy, now holding only short-term U.S. Treasuries with maturities within 93 days, making it fully compliant with the 《GENIUS Act》 standards for stablecoin reserve assets. This adjustment transforms LUIXX into a “plug-and-play” infrastructure designed for payment stablecoins and bank-level issuers, providing regulated, government-backed high-quality collateral.

A Franklin Templeton spokesperson confirmed that stablecoin issuers can now manage their reserves using this U.S. Treasury obligation fund while remaining under SEC supervision.

This not only makes LUIXX one of the first money market products specifically designed to meet federal stablecoin reserve guidelines but also provides a solid financial backend for the digital payments industry. In an increasingly clear regulatory environment, connecting fund structures with the 《GENIUS Act》 allows financial institutions to operate within a controlled market while enjoying the high regulatory standards of traditional funds. By precisely fine-tuning LUIXX’s asset allocation, Franklin Templeton has successfully offered a capital management solution that aligns with innovation trends without sacrificing stability, further solidifying its leadership in the digital asset industry.

DIGXX Introduces Digital Share Classes: Enabling 24/7 Settlement and Trading

In another update, DIGXX fund introduces a new “Digital Institutional” share class, a novel level designed specifically for distribution via blockchain platforms.

This change means approved intermediaries—including banks, broker-dealers, custodians, and tokenization platforms—can now record and transfer fund ownership using blockchain technology. Operating on blockchain rails, DIGXX’s digital shares can provide near-instant settlement and enable 24/7 continuous trading, significantly reducing the settlement delays common in traditional fund transfers.

The core advantage of this technological integration is that it allows fund shares to deeply integrate with digital collateral systems and cash management systems, enabling institutional investors to manage their U.S. Treasuries and related assets without leaving the blockchain ecosystem.

Franklin Templeton plans to provide access to these digital rails through multiple trusted partners, allowing financial intermediaries to directly invoke these services within their proprietary blockchain front-end interfaces.

It is noteworthy that, despite the on-chain functionalities, the underlying asset composition and operational rules of the DIGXX fund still strictly adhere to traditional money market fund regulations, ensuring a balance between innovation and security. Roger Bayston emphasized that this approach prioritizes interoperability and flexibility, aiming to offer clients more access points and ways to deploy regulated capital, thereby enhancing overall asset management efficiency.

From Experiment to Norm: Franklin Templeton’s Digital Asset Strategy Blueprint

Bayston describes these two fund updates as an “incremental” rather than “experimental” evolution, symbolizing that Franklin Templeton now regards its digital asset strategy as a core part of its business.

In fact, the company began exploring blockchain innovation as early as 2018 and has accelerated its on-chain deployment in recent months. For example, in November 2025, the company launched a tokenized money market fund in Hong Kong and expanded its Benji platform to the Canton network in the same month.

Further reading
Franklin launches Hong Kong’s first tokenized fund! Responds to Hong Kong policy, partners with HSBC for pilot
Franklin tokenization platform lands on BNB Chain! BENJI charges by the second, aiming to capture a 30 trillion market
Ripple partners with DBS and Franklin! Launches tokenized trading and lending, as traditional finance moves onto the chain

Additionally, the company has been deeply involved in the Wyoming $FRNT stablecoin project, which is the first stablecoin supported by a U.S. state government and fully backed by USD, demonstrating its expertise in digital native financial products.

Franklin Templeton’s layout in stablecoin reserve management is not isolated; the entire asset management industry is showing a collective shift. BlackRock, the world’s largest asset manager, announced a similar plan in October 2025 to modify one of its U.S. Treasury money market funds to comply with the GENIUS Act, thereby becoming an authorized reserve asset issuer for U.S. stablecoins.

Further reading
Wall Street giant’s new move! BlackRock redesigns BSTBL fund targeting stablecoin reserve markets

BlackRock currently manages a dedicated government money market fund for Circle’s $USDC reserve management, reflecting that regulated cash funds are increasingly viewed as the backend rails for tokenized USD.

Bayston expects that future stablecoin reserves will exist both in tokenized and traditional forms, and is optimistic that as more financial institutions launch their own tokens, the demand for multi-manager delegated and customized investment portfolios will grow. By upgrading traditional capital pools to digital-compatible architectures, Franklin Templeton is not only adapting to new regulations but also leading a new chapter of integration between traditional finance and blockchain technology.