Cryptocurrency exchange Bybit will now let eligible institutional clients use tokenized money market funds from Franklin Templeton as collateral for trading, marking another step in the growing convergence between traditional finance and digital asset markets.
How the Arrangement Works
Under the new offering, qualifying institutions can pledge fund shares issued through Franklin Templeton's Benji platform to secure stablecoin credit lines on Bybit. The setup allows firms to unlock trading liquidity without having to sell their holdings in the underlying tokenized funds.
Crucially, the arrangement keeps the pledged assets in off-exchange custody. Rather than transferring the tokenized fund shares directly to the exchange, institutions retain them in a separate custodial environment, reducing counterparty exposure while still gaining access to credit.
Institutions can now put tokenized funds to work as collateral without ever giving up custody of the underlying assets.
This structure addresses a longstanding concern among institutional players wary of holding significant balances directly on exchanges. By decoupling collateral custody from the trading venue, the model aims to offer both capital efficiency and enhanced security.
A Broader Push Into Tokenized Assets
The move reflects a wider trend in which established asset managers are bringing traditional financial products onto blockchain rails. Franklin Templeton has been among the more active traditional firms in the tokenization space, using its Benji platform to issue and manage on-chain representations of fund shares.
For Bybit, integrating a regulated asset manager's tokenized products signals an effort to court institutional capital by blending familiar financial instruments with crypto-native infrastructure. Money market funds, which typically hold short-term, low-risk instruments, are seen as attractive collateral candidates because of their relative stability.
Key elements of the offering include:
- Eligibility limited to qualifying institutional clients
- Tokenized fund shares issued via the Benji platform
- Stablecoin credit lines backed by pledged collateral
- Underlying assets held in off-exchange custody
As tokenization gains momentum across the industry, arrangements like this one could become a template for how exchanges and asset managers collaborate to serve institutional demand for capital-efficient, custody-conscious trading solutions.