$1.4 Trillion Investment Firm Launches Tokenized Mutual Fund on Polygon

Franklin Templeton, the subsidiary of a global investment firm with $1.4T in assets under management, launched its on-chain money fund, a stablecoin alternative, on the Polygon network on Wednesday.

The Franklin OnChain U.S. Government Money Fund (FOBXX) is a U.S.-registered mutual fund that executes transactions and records share ownership using the Stellar blockchain. The fund seeks to pay investors dividends while maintaining a stable share price of $1 by investing at least 99.5% of its assets under management in government securities, cash, or repurchase agreements.

Roger Bayston, head of digital assets at Franklin Templeton, highlighted that the integration is Franklin’s first within the Ethereum ecosystem. “Extending the reach of [FOBXX] to Polygon enables the Fund to be further compatible with the rest of the digital ecosystem, specifically through an Ethereum-based blockchain,” Bayston said.

The news is the latest sign of increasing institutional interest in Ethereum and its ecosystem following its transition to Proof of Stake consensus last year. Last month’s Shapella upgrades, which activated Staked Ether withdrawals for the first time, have further stoked institutional appetite for Ethereum.

On Monday, Tom Wan, a researcher at crypto ETP provider, 21Shares, tweeted that there were $1B worth of staked Ether inflows over the previous week. “Flow is mainly driven by institutional staking providers,” he said.

Polygon is a top Ethereum scaling team. Its PoS Chain is the fifth-largest smart contract network with $1B locked. Polygon has also launched several Layer 2 rollup solutions, including ZkEVM, Nightfall, and Miden.

Bringing TradFi On-Chain

Still, while Polygon is an Ethereum side-chain, it should be noted that it’s not Ethereum itself, which poses tradeoffs. The Polygon smart contract admin key is controlled by a five out of eight signers system, noted Mona El Isa, CEO of Avantgarde, an on-chain money management platform.

“Ethereum, as a more secure, decentralized, and battle-tested platform, is a more suitable choice for managing funds like Franklin Templeton’s DeFi fund,” she said.

FOBXX opened to the public last year, becoming the first U.S.-registered fund to record transactions and ownership using blockchain.

The fund’s shares are represented on-chain by non-transferable BENJI tokens, with the fund representing a nearly $273M market cap. The fund delivered an annual return of 2.8% to investors over the 12 months preceding April.

Colin Butler, head of institutional capital at Polygon Labs, praised Franklin Templeton for embracing blockchain technology.

“It’s amazing to have a legacy institution like Franklin Templeton bringing transparency, interoperability, and secure, democratized access to their financial instruments,” he said. “When we take a step back and look at these things less as blockchain products and more as benefits created by utilizing blockchain rails, we start to see the ‘why.’”

On Monday, Bayston told Bloomberg that the asset manager recently experienced an “elevated” volume of enquiries into its fund from web3 entities, including DAOs and foundations. The Stellar Development Foundation invested $20M of its treasury assets into FOBXX.

Leading Companies Look To Polygon

On Wednesday, Google Cloud announced a “multi-year strategic alliance” with Polygon. Google Cloud will provide infrastructure and tooling to developers building on Polygon as part of the deal. Its node management platform, Blockchain Node Engine, will also support Polygon’s PoS Chain.

Google Cloud first began working with Polygon in 2021, when it rolled out support for Polygon PoS Chain on-chain analytics on its BigQuery serverless database platform.