Tokenized Money Market Strategy With Western Asset Funds

Institutional investors are gaining new ways to access the growing tokenized money market ecosystem as Franklin Templeton upgrades two Western Asset vehicles for on-chain use.

Franklin Templeton adapts Western Asset funds for tokenized finance

Franklin Templeton, based in San Mateo, announced that two institutional government money market funds managed by affiliate Western Asset Management are now structured for two key use cases in tokenized products.

One use case serves regulated stablecoin reserves under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS Act), while the other supports distribution across blockchain-enabled platforms.

These changes highlight the firm’s push to apply blockchain technologies to established vehicles rather than creating entirely new products. Moreover, the move reflects how traditional managers are preparing for a more digital market structure in institutional cash and liquidity management.

“Traditional funds are already beginning to move on-chain, so rather than question their ability, our focus is to make them more accessible and useful by many,” said Roger Bayston, Head of Digital Assets at Franklin Templeton. His comments underscore a strategy focused on interoperability and institutional-grade infrastructure.

“The Western Asset Liquidity business has long focused on helping clients move forward without choosing between innovation and managing risk,” added Matt Jones, Franklin Templeton’s Head of Institutional Liquidity. “Being early only matters if you do it responsibly, and these updates prove how we can help institutions adopt tokenized infrastructure with products they already know.”

GENIUS Act-ready Western Asset Institutional Treasury Obligations Fund

The Western Asset Institutional Treasury Obligations Fund ($LUIXX) has been updated to align with the reserve requirements of the GENIUS Act, the federal stablecoin framework signed into law in July 2025. The fund now invests exclusively in U.S. Treasuries with maturities of 93 days or less, positioning it for use in stablecoin reserve management.

By focusing entirely on short-term Treasuries, the vehicle is structured to address institutional demand for high-quality liquid assets that can back digital liabilities. Moreover, the design aims to help issuers maintain conservative risk parameters while benefiting from money market fund diversification and professional management.

The firm notes that the stablecoin market has already surpassed $310 billion in total supply and is projecting to reach approximately 2 trillion by 2030. As that market expands, demand is expected to rise for regulated, transparent liquidity options across digital payment, settlement, and collateral platforms. That said, the fund itself remains a traditional Rule 2a-7 government money market fund, operating within the U.S. regulatory framework.

New Digital Institutional Share Class for blockchain distribution

The Western Asset Institutional Treasury Reserves Fund ($DIGXX) has introduced a new Digital Institutional Share Class, also trading under the symbol $DIGXX. This class is specifically designed for distribution via blockchain enabled intermediaries, giving approved partners a way to record and transfer fund share ownership on-chain.

Through this structure, intermediaries can use blockchain rails for faster settlement cycles, 24/7 transaction capability, and more seamless integration with digital collateral and cash management systems.

However, the fund itself continues to operate as a traditional, SEC-registered institutional money market vehicle, preserving the regulatory profile investors expect.

As interest in tokenized money market structures grows among large investors, this model illustrates how asset managers can separate the distribution layer from the underlying portfolio. Moreover, it offers a template for blockchain fund distribution that retains the familiar regulatory status of existing products while modernizing access and operations.

In comments on the launch, Bayston reiterated Franklin Templeton’s focus on open connectivity. “By prioritizing interoperability and flexibility, we’re opening more ways for clients to access and deploy regulated funds across the platforms they rely on, giving investors greater choice in how they put their capital to work.” That said, the firm emphasizes that its approach is grounded in existing disclosure and compliance regimes.

Franklin Templeton’s broader digital asset strategy

Franklin Templeton positions itself as a pioneer in digital asset investing and blockchain innovation, bringing together tokenomics research, data science, and technical engineering since 2018.

The company is part of a growing field of managers experimenting with tokenized liquidity solutions, alongside other initiatives such as institutional liquidity tokenization pilots and early experiments in tokenized money market fund designs.

While some market attention has focused on offerings like a franklin templeton tokenized money market fund or similar pilot structures from large peers, the Western Asset changes show a more incremental strategy. Moreover, the emphasis on compatibility with existing stablecoin reserve frameworks could help bridge on-chain payment systems with long-established fund structures.

Beyond digital assets, Franklin Templeton presents itself as a trusted investment partner delivering tailored solutions aligned with clients’ strategic objectives. Founded in 1947, the firm combines public and private market expertise with technology-driven tools to help clients navigate shifting market conditions and capture new opportunities.

Franklin Resources, Inc., which trades on the NYSE under the symbol BEN, remains the corporate parent behind these initiatives. As blockchain-based market infrastructure matures, the company is likely to continue refining products that connect regulated capital markets with emerging digital rails.

Franklin Templeton’s updates to Western Asset’s institutional money market funds show how established managers are adapting existing products for the GENIUS Act stablecoin regime and blockchain-enabled distribution, offering institutional investors regulated access points to an increasingly tokenized cash and collateral landscape.