Key Takeaways:
Franklin Templeton is expanding its off-exchange collateral program to Bybit.
Bybit users can pledge tokenized money market fund shares to borrow USDT or USDC while earning yield.
The shares represent roughly $686 million in net assets and pay about 3.7% annualized.
Assets stay off-exchange with Bycustody, with value mirrored on Bybit.
This follows similar deals with Binance and OKX, as tokenization gains momentum.
Franklin Templeton is bringing its tokenized money market funds to Bybit. The $1.7 trillion asset manager announced on Monday that it is expanding its off-exchange collateral program to the crypto exchange, allowing users to pledge shares in its tokenized money market funds as collateral to borrow stablecoins .
The shares represent roughly $686 million in net assets and pay about 3.7% annualized yield, according to the latest seven-day rate .
What Actually Happens
Here's how it works. A Bybit user pledges shares in Franklin Templeton's tokenized money market fund. The underlying assets don't move to Bybit. Instead, they stay off-exchange with Bycustody, a regulated custody platform. The value is mirrored inside Bybit's trading environment, allowing the user to borrow USDT or USDC while still earning yield on the underlying assets .
The shares are issued through Benji, Franklin Templeton's blockchain-based record-keeping platform. Benji launched in 2021 as the first U.S.-registered mutual fund to use a public blockchain as its official system of record .
Why This Matters for Institutions
This isn't Franklin Templeton's first rodeo. The firm already offers similar off-exchange collateral programs to Binance and OKX customers . The pattern is clear: institutions want yield-bearing collateral that can settle around the clock, without moving assets onto an exchange.
Sandy Kaul, Head of Digital Assets and Innovation at Franklin Templeton, put it simply in an interview: "So now I'm able to really look across the top exchanges and be able as an investor to use my collateral more optimally while earning yield on it. That to me is a critical unlock to really allow the ecosystem to grow" .
Yoyee Wang, Bybit's global head of RWA and TradFi, said institutions increasingly expect the same flexibility and risk standards from crypto venues that they get in traditional markets .
The Tokenization Trend
This deal is part of a broader shift. Tokenized real-world assets tracked on-chain totaled roughly $38.2 billion as of late August, up from about $20.6 billion a year earlier . Tokenized U.S. Treasury debt accounted for roughly $15.6 billion of that total.
Franklin Templeton's own tokenized Treasury assets under management have grown by roughly 100% this year to around $2.5 billion, according to its published figures .
Other platforms are moving too. Crypto.com and Deribit now allow qualified users to use BlackRock's BUIDL fund as trading collateral .
Why Wall Street Hesitates
Franklin Templeton CEO Jenny Johnson has been blunt about why traditional finance resists public blockchains. Speaking at a summit earlier this year, she said the technology threatens fee-based business models built on intermediating transactions .
"It was so dramatically cheaper," Johnson said, citing internal data. "It cost us about $1.30 a transaction for 50,000 transactions on the old system. And it cost us about $1.13 to run on the Stellar blockchain" .
The savings may sound small, but at institutional scale, they add up.
What's Still Unclear
The press release leaves out some details. It doesn't say which specific fund in Franklin's suite qualifies, what loan-to-value ratios apply, or how a margin shortfall would be handled against shares held in custody . Settlement frequency and client eligibility aren't specified either.
Bybit says the structure reduces counterparty exposure since nothing is handed to the exchange. But the program is new, so there's no track record yet of how it behaves in a fast market .
Frequently Asked Questions
What is Bybit's partnership with Franklin Templeton?
Bybit users can pledge shares in Franklin Templeton's tokenized money market funds as collateral to borrow USDT or USDC while earning yield on the underlying assets .
How much yield do the shares pay?
About 3.7% annualized, based on the latest seven-day rate .
Do the assets move to Bybit?
No. They stay off-exchange with Bycustody, a regulated custody platform, while their value is mirrored inside Bybit's trading environment .
Is this the first such deal?
No. Franklin Templeton already has similar programs with Binance and OKX .
Bottom line: Franklin Templeton's Bybit partnership is another step in the tokenization of traditional finance. Institutions want yield-bearing collateral they can use without moving assets onto exchanges. The trend is clear — and it's accelerating.
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