Franklin Templeton puts $686M tokenized fund on Bybit as collateral

Franklin Templeton and Bybit opened a new way to trade on credit. Bybit clients can now pledge shares of the asset manager's tokenized money market fund, worth about $686 million, as collateral for stablecoin loans while the shares keep earning yield.

The two firms announced the deal in a joint statement at 12:00 UTC on Monday, 28 September 2026. Franklin Templeton, which manages $1.7 trillion in assets, said eligible clients can borrow the stablecoins USDT or USDC against the fund shares without sending the underlying assets to the exchange.

How the arrangement works

Here is the mechanism. Franklin Templeton issues the fund shares through its Benji platform, its own blockchain record-keeping and transfer system. When a client pledges those shares, a regulated custodian called ByCustody holds the assets off the exchange. Bybit then mirrors their value inside its trading system and opens a USDT or USDC credit line against them.

Think of it like borrowing against a savings account that keeps paying interest. The client trades with the borrowed stablecoins. The fund shares stay put. They paid a 3.7% annualized yield based on the fund's latest seven-day rate, according to CoinDesk. That yield keeps running even while the shares back a loan.

For a trading desk, that matters. Idle collateral earns nothing on most exchanges. Here it earns a money-market return and still frees up cash to trade.

Why exchanges are chasing tokenized funds

This is not Franklin Templeton's first deal of this kind. The firm already runs similar off-exchange collateral programs with Binance and OKX. Bybit, which says it has 80 million users, is the latest large venue to plug in.

Sandy Kaul, head of digital assets and innovation at Franklin Templeton, said the tie-up lets institutions "put regulated, yield-bearing assets to work in digital markets." Yoyee Wang, Bybit's global head of real-world assets and traditional finance, framed it as capital efficiency. Investors, she said, "increasingly expect the same flexibility, capital efficiency, and risk management standards they are accustomed to in traditional markets."

Tokenized money market funds have grown fast as banks and asset managers test blockchain rails. Stocks, bonds and funds are all getting tokenized versions that trade on chains. Money that once sat in a broker's account can now move as a token and serve as collateral in minutes. That is the pitch. Whether it changes how most people trade is another matter.

What the announcement leaves out

The press release is the companies' own framing, and it skips some detail. Neither firm said how large the credit lines can go, what haircut applies to the pledged shares, or which countries' clients qualify. The $686 million on offer is small next to the volumes that flow through Bybit each day.

Off-exchange custody lowers one risk. Client assets do not sit on the exchange, so a Bybit failure would not sweep them up. It does not remove every risk. Far from it. A borrower still owes the stablecoins, and a sharp market move could force a margin call against collateral that is only as liquid as the fund behind it.

What to watch

Both firms said more products are coming. They plan a tokenized wealth product on Bybit and on the Mantle blockchain, plus education material aimed at retail investors. Watch whether rival managers such as BlackRock push their own tokenized funds onto exchanges the same way. Watch, too, for any regulator that asks how borrowed stablecoins and yield-bearing collateral fit existing rules.