Franklin Templeton tokenized funds get verification system on Jiritsu

As an analyst with over a decade of experience in the finance industry, I find this development by Franklin Templeton to be an exciting step towards bridging the gap between traditional finance and decentralized finance (DeFi). The integration of Jiritsu’s verification system on Avalanche is a significant move that could potentially democratize access to these funds for retail investors.

The Franklin Templeton funds, namely the Franklin Bitcoin ETF (EZBC) and the Franklin OnChain US Government Money Fund (FOBXX), have adopted a verification system through the Jiritsu network on Avalanche, as mentioned by Jacob Guedalia, one of the co-founders of Jiritsu.

With the introduction of this novel system, asset managers can now create tokens representing their fund’s shares, making it possible for these tokens to be accessible to individual investors (retail investors), thereby opening up investment opportunities in a straightforward manner.

Since 2021, the FOBXX fund has been exchangeable across multiple blockchain platforms as the BENJI token. This digital token stands for the fund’s shares on these networks. At present, it can be found on Stellar, Polygon, Arbitrum, Base, and Avalanche networks.

However, it can only be traded by registered asset managers. Retail investors are currently not able to invest in the fund directly, using a standard Web3 wallet.

Geudalia explains that the latest validation process represents a stride towards overcoming this constraint, since it enables asset managers to produce derivative tokens secured by BENJI, while using blockchain technology to verify that every token issued has adequate backing, thus preventing any tokens from being minted without proper support.

“If you’re an asset manager and you’re holding BENJI and I buy a token that represents a fractional ownership of your portfolio of [those] BENJI tokens, what it does is it verifies that the money is there […] And we have a control mechanism, a policy mechanism, that says ‘you cannot mint that token unless you’ve got something to back it up.’”

The verification process relies on Jiritsu’s multi-party computation (MPC) network to maintain compliance with this policy.

It’s anticipated that retail tokens tied to the fund will be accessible to investors prior to the year’s end. To gain access to these tokens, verification through an online portal (KYC) is necessary. However, it’s important to note that this opportunity isn’t limited only to asset managers; most investors are eligible. In due time, these tokens can also be integrated into decentralized finance (DeFi) applications for use.

Making retail tokens available for purchase can simplify the investment process for users, as Guedalia explained. For instance, if an investor possesses Treasury bond fund shares in a brokerage account and desires to invest in a Decentralized Finance (DeFi) platform, they would initially have to convert their yield-generating shares into non-yielding stablecoins. Then, they’d need to exchange those stablecoins for yield-producing blockchain assets. By offering retail tokens directly, this complex process can be streamlined and made more accessible for investors.

By using tokens on the blockchain that correspond to these shares, we can eliminate some of the resistance or smoothness in the process. As he put it, “It’s like taking away the friction or increasing the speed at which transactions can occur.

Furthermore, rather than putting their profits from selling Bitcoin or other digital currencies into stablecoins, investors have the option to hold those assets and gain returns as they look for other potential investment options.

Funds similar to Franklin Templeton’s aren’t exclusive to their brand; for instance, BlackRock’s BUIDL money market fund is accessible on various blockchain networks too. Moreover, the USDY token from ONDO offers yield earnings to individual investors and holds backing by U.S Treasury securities.

2024-12-03 17:11

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