How Franklin Templeton’s Tokenized Fund Shares Become Bybit Trading Collateral

Franklin Templeton and Bybit are giving eligible institutions a way to use tokenized money market fund shares as trading collateral without transferring them onto the exchange. Shares issued through Franklin Templeton’s Benji Technology Platform are pledged through ByCustody; Bybit reflects their value in its trading environment and offers access to USDT or USDC credit lines. The shares remain in custody and can continue earning fund yield. 185

The arrangement makes a yield-bearing investment usable as trading collateral, but it does not make the credit risk-free or guarantee a particular return. The reported fund’s roughly $686 million in net assets is the fund size—not the amount pledged through Bybit. 29

How the collateral arrangement works

The process has three parts:

1. Benji issues the fund shares. Franklin Templeton’s Benji Technology Platform is its blockchain-integrated recordkeeping and transfer-agency infrastructure. 18
2. ByCustody holds the pledged assets off-exchange. Eligible clients pledge their shares through ByCustody rather than moving them onto Bybit. 18
3. Bybit recognizes the collateral value. The value is reflected in Bybit’s trading environment, enabling access to credit lines denominated in USDT or USDC. 18

The distinction is important: the fund shares support a trading credit line, but the underlying assets are not deposited on the exchange. The partners say clients can continue earning yield on the shares while they are pledged. That yield is generated by the fund; it is not a guaranteed return on the credit arrangement. 185

What the roughly $686 million figure means

The reported figure describes net assets in the relevant Franklin Templeton fund, not the volume of shares pledged, credit extended, or trading activity on Bybit. A separate report put the Franklin OnChain U.S. Government Money Fund’s net assets at $686.64 million as of August 31, 2026. 29

Keeping those figures distinct helps avoid overstating the scale of the new collateral program: the sources do not say how much of the fund has been pledged through Bybit.

A wider move toward tokenized collateral

Bybit is not Franklin Templeton’s first exchange partner for this model. In February 2026, Franklin Templeton and Binance announced an institutional off-exchange collateral program using Benji-issued money market fund shares and Ceffu’s custody layer. 13

There are also other fund-and-venue combinations. Binance has been reported to accept BlackRock’s BUIDL as off-exchange collateral. That is a separate arrangement; the available information does not establish that its terms match Franklin Templeton and Bybit’s. 44

Together, these examples show tokenized money market shares being used for more than holding or transferring fund exposure: they can also support access to trading liquidity. The Bybit program’s published announcement, however, is specifically about eligible clients and its own custody and credit-line setup. 18

What off-exchange custody does—and does not—change

Keeping collateral outside an exchange changes where the assets are held. It does not, by itself, remove the risks involved in relying on fund shares to support trading credit. Institutions evaluating the structure would need to understand the custody arrangement, how collateral value is assessed, and what happens if values or liquidity change. Trading with borrowed funds also adds exposure beyond simply holding fund shares.

The announcement describes access for “eligible” clients, but the available materials do not provide a complete breakdown of qualification criteria or all credit-line and collateral terms. Those details matter when assessing practical access and risk; the headline mechanism alone is not enough to judge how the arrangement performs under stress. 181