On September 28, 2026, Franklin Templeton and Bybit announced that eligible institutional clients can now use tokenized BENJI fund shares as trading collateral on Bybit. Clients pledge fund shares held in off-exchange custody and receive USDT or USDC credit lines against them — continuing to earn Treasury yield on their BENJI holdings while using them to finance crypto trading positions.
This is the second major exchange collateral program for BENJI. Franklin Templeton already runs a similar arrangement with Binance. Together, these programs represent a significant step in what Franklin Templeton describes as its "collateral use case" — one of the four intended markets for its BENJI suite alongside retail, wealth management, and institutional investors.
How the Collateral Model Works
Traditional crypto exchange collateral requires investors to transfer assets — cash, stablecoins, or crypto — onto the exchange and surrender custody. The assets sit on the exchange's balance sheet during the trading relationship. If the exchange fails, the assets may be at risk as unsecured claims (the FTX collapse in 2022 made this risk concrete).
Franklin Templeton's collateral model is structured differently. BENJI tokens representing fund shares remain in custody with the transfer agent and custodian infrastructure of the Franklin OnChain US Government Money Fund (FOBXX) — off the exchange's balance sheet. The fund shares are pledged as collateral to Bybit through an arrangement that gives Bybit a security interest in them, but custody stays with the fund's custodian. Bybit extends a stablecoin credit line against the pledged shares.
The investor earns Treasury yield on the BENJI shares during the collateral arrangement. The yield is not surrendered. This is the key difference from posting cash collateral: cash earns nothing while sitting on an exchange as margin. A BENJI position earning approximately 4.5% annualized continues earning during the entire period it serves as collateral.
The SEC No-Action Letter That Enabled This
In August 2026, the SEC issued a no-action letter permitting Franklin Templeton's registered funds to use tokenized FOBXX and BENJI tokens for cash and collateral management. This letter addressed a specific regulatory question: whether using fund shares as collateral in arrangements like the Bybit program would violate the Investment Company Act's restrictions on funds engaging in securities lending or borrowing without specific authorization.
The no-action letter provided the regulatory clarity that allowed the Bybit program to proceed. It is also a significant precedent — the first SEC staff acknowledgment that tokenized registered fund shares can serve as collateral in structured arrangements with crypto trading venues.
BENJI's Growth and What the Collateral Use Case Adds
BENJI grew from approximately $600 million in January 2026 to roughly $2.5 billion by mid-2026, making it one of the two or three largest tokenized money market funds alongside BlackRock's BUIDL and Hashnote/Circle's USYC. The growth has been driven primarily by institutional and wealth management adoption — BENJI's retail-accessible minimum (~$20 through the Benji Investments app) is unique in the tokenized Treasury market, but institutional capital accounts for the majority of AUM.
The collateral use case adds a new dimension to BENJI's value proposition. A tokenized Treasury fund that earns yield and serves as collateral for active trading is a more attractive treasury management instrument than one that earns yield alone. The parallel with traditional financial markets: prime brokers have long offered arrangements where institutional clients' Treasury holdings serve as collateral for leveraged trading positions. BENJI on Bybit is bringing that structure into crypto market microstructure.
Franklin Templeton and Bybit also announced plans for a tokenized investment product available to Bybit wallet users on the Mantle network, though the details of that product have not been disclosed as of October 4, 2026.
- Cointelegraph — Bybit accepts Franklin Templeton tokenized funds as trading collateral — September 28, 2026
- Finance Magnates — Franklin Templeton extends tokenised money market collateral to Bybit — How the collateral model works; also covers Binance program
- CryptoBriefing — Franklin Templeton expands tokenized collateral service to Bybit — SEC no-action letter context and BENJI growth
→ BUIDL, BENJI, USYC, OUSG compared — full fund comparison including collateral programs
→ 81% of tokenized Treasury value sits idle — the collateral use case is the productive exception
→ Stock tokens as collateral — the weekend price feed gap that BENJI does not have