Global asset manager Franklin Templeton has executed a strategic restructuring of two of its institutional money market funds (MMFs) to serve as dedicated reserve vehicles for the U.S. stablecoin market, a move that bridges traditional finance with blockchain-based digital assets.
The firm amended its Western Asset Institutional Treasury Obligations Fund (LUIXX) and Western Asset Institutional Treasury Reserves Fund (DIGXX). Both funds maintain their existing registration with the U.S. Securities and Exchange Commission (SEC) as 2a-7 money market funds. However, their operational structures and investment mandates have been specifically adapted to align with the emerging regulatory framework for payment stablecoins, notably the proposed Clarity for Payment Stablecoins Act, often referred to as the GENIUS Act.
The LUIXX fund invests exclusively in short-term U.S. government obligations, positioning it as "plug-and-play" infrastructure for payment stablecoin treasuries that require SEC-registered, government-only collateral. The DIGXX fund has added a blockchain-enabled "Digital Institutional" share class on top of its existing 2a-7 structure. This allows it to function as 24/7, on-chain collateral and cash management for tokenization platforms, custodians, and broker-dealers.
"We expect stablecoin reserves to be managed 'in both tokenized and more traditional form,'" said Roger Bayston, head of digital assets at Franklin Templeton. He emphasized the company's role is to manage reserves in the product model clients prefer, whether via bespoke portfolios or open-end mutual funds.
Franklin Templeton framed the amendments as incremental rather than experimental, designed to meet client demand for familiar, SEC-registered wrappers as they integrate with on-chain systems. The firm plans to support access through multiple "trusted partners" as financial institutions roll out blockchain-enabled frontends.
This strategic conversion is part of a broader trend among major asset managers. BlackRock announced similar plans in October 2025 to modify a Treasury money market fund to serve as an authorized reserve asset for U.S. stablecoin issuers, having already managed a bespoke government MMF for Circle's USDC reserves. The move signals accelerating institutional adoption of blockchain infrastructure and validates stablecoins as a legitimate destination for institutional capital.
