ETFs and Mutual Funds Will Be on Blockchain: Franklin Templeton

A leading asset management firm has praised blockchain technology and suggested that exchange-traded funds (ETFs) and mutual funds will appear on blockchain in the near future.

In a May 10 interview with Bloomberg TV, Jenny Johnson, president and CEO of global asset management firm Franklin Templeton, discussed the benefits of blockchain, where the technology is headed, and how her company is leveraging it.

“I think eventually both ETFs and mutual funds will be on the blockchain,” Johnson said.

Exchange-traded funds (ETFs) and mutual funds are investment pools that pool money from a variety of investors to purchase portfolios of stocks, bonds, or other assets. ETFs are traded on stock exchanges, while mutual funds can be bought and sold directly through the fund company.

In 2021, Franklin Templeton launched the Franklin Onchain US Government Money Fund, a blockchain-based money market fund, which currently has a market capitalization of $367 million. Until recently, it was the largest blockchain-based treasury fund on the market, ranked second by BlackRock’s BUIDL fund.

Johnson revealed how the U.S. Securities and Exchange Commission (SEC), one of the country’s top financial market regulators, required Franklin Templeton to run a blockchain-based shareholder record alongside its existing in-house system for six to eight months.

The SEC explained: “Although the fund’s transfer agent maintains formal records of share ownership in the form of ledger entries, ownership of fund shares is also recorded on the blockchain on the Stellar network. The use of blockchain technology has not been tested for mutual funds. In the event of a conflict between blockchain records and records held by the transfer agent, the transfer agent’s records are decisive.”

The regulator was also keen to highlight the risks involved, saying “complex information technology and communications systems, such as blockchain networks, are subject to a variety of threats or risks that could have a negative impact on funds.”

Nonetheless, Johnson suggests that Franklin Templeton was impressed by the benefits blockchain offered.

“We were surprised at how inexpensive it was to run on blockchain. “It’s a very efficient technology,” Johnson said. Johnson said this reduces the need for opposing parties to reconcile because everyone shares the same single source of data.

“This is costing us a lot of money,” Johnson said. “When you take the friction out of transactions, you can start investing in new areas.”

When we asked individual investors about the risks of digital assets, the asset manager commented, “There are a lot of risky areas, which is why you need good advice if you are investing in the digital assets or cryptocurrency world.”

She continued: “There are also some really interesting investment opportunities in that space. “But it’s difficult, and you can definitely step on a land mine.”

To successfully navigate this minefield, Franklin Templeton runs a digital assets course, ‘Decoding Digital Assets’, which provides advice to help clients “effectively integrate digital assets into their business and enhance what they do”.

Watch: Verifying Academic Credentials Using the BSV Blockchain

Are you new to blockchain? To learn more about blockchain technology, check out CoinGeek’s Blockchain for Beginners section, our ultimate resource guide.