Franklin Templeton and Binance launch off-exchange tokenized fund collateral for institutional trading

Franklin Templeton and Binance have introduced a mechanism that allows institutional clients to use digitally represented units of money-market funds as trading collateral without moving the underlying assets onto a trading platform. Under the arrangement, custody partners retain the actual securities while the exchange recognizes an equivalent collateral position inside its trading systems. The design responds to institutional unease following multiple exchange collapses and widely publicized custody failures, offering an alternative to depositing cash or crypto directly with trading venues. By keeping the real assets in regulated custody, institutions reduce the risk that those holdings will be trapped if an exchange has solvency or operational problems. At the same time, the pledged fund units continue to produce returns, which can raise the efficiency of deployed capital relative to leaving balances idle on an exchange. The program relies on a custody and settlement provider to hold the tokenized units and enable their use as collateral inside Binance’s infrastructure. Franklin Templeton’s move is consistent with a broader industry shift where traditional asset managers adapt existing cash and liquidity products for tokenized rails instead of creating brand-new crypto-native funds. U.S. regulatory commentary has grown more receptive to practical tokenization models, which reduces a key obstacle for product rollout to institutional clients. For trading venues, the arrangement offers a way to attract large counterparties while addressing their principal concern: custody safety. For asset managers and custodians, it creates a pathway to monetize liquidity products in digital markets without surrendering regulatory-compliant safekeeping. If adopted at scale, the model could reshape how institutional liquidity is sourced for crypto markets by narrowing the gulf between regulated custody and exchange exposure. The long run will depend on operational resilience, legal clarity around re-hypothecation and insolvency, and the willingness of more banks and funds to integrate tokenized versions of existing cash instruments.