Franklin Templeton's new Bybit deal is off-limits to Canadians, while domestic banks and regulators work on their own versions
Tokenized money market funds are increasingly being accepted as crypto collateral on global crypto exchanges, and Franklin Templeton’s new arrangement with Bybit is the latest example.
Canadian investors cannot use this one, however, because Bybit began withdrawing from the Canadian market in May 2023 and cited regulatory developments.
Under the deal, eligible clients pledge fund shares issued through Franklin Templeton’s Benji Technology Platform, its blockchain-integrated recordkeeping and transfer agency system.
The shares are pledged through ByCustody, an institutional-grade custody platform. In return, clients receive trading credit lines on Bybit in USDT or USDC, two US-dollar stablecoins.
The shares remain off the exchange in custody, and Bybit mirrors their value in its trading environment so that clients continue to earn yield on the holdings.
Bybit reports more than 80 million users worldwide, and Franklin Templeton has USD1.7 trillion in assets under management.
The firms described the program as the first initiative of a strategic collaboration.
A platform outside Canadian reach
Bybit’s departure followed earlier friction with Canadian regulators. In June 2022, the Ontario Securities Commission took enforcement action against Bybit, which paid $2.4 million for failing to comply with Ontario securities law.
The exit came after the Canadian Securities Administrators said in February 2023 that crypto firms operating in Canada had to register their compliance with a new set of guidelines.
Bybit stopped accepting new Canadian accounts and set a date after which existing users could no longer deposit or add positions.
Asset managers compete for collateral status
The Bybit program closely mirrors one Franklin Templeton launched with Binance in February. It also uses Benji-issued fund shares as off-exchange collateral, with Ceffu acting as the custody layer.
Rival tokenized money market funds and Treasury products are pursuing the same role. BlackRock’s BUIDL tokenized Treasury fund is accepted as trading collateral on Binance, Crypto.com and Deribit.
The tokenized asset market is growing. Tokenized Treasuries passed USD10 billion in market capitalization for the first time on February 11, 2026, and total tokenized real-world assets reached USD19.32 billion by March 31.
Franklin Templeton’s Franklin OnChain U.S. Government Money Fund reported USD813.5 million in total net assets as of May 31.
Custody risk behind the design
Bybit said keeping collateral off the exchange reduces counterparty exposure and improves capital efficiency and treasury management.
The exchange itself lost about USD1.5 billion in virtual assets in February 2025, in a theft the FBI attributed to North Korea.
“As institutional adoption of digital assets accelerates, investors increasingly expect the same flexibility, capital efficiency, and risk management standards they are accustomed to in traditional markets,” said Yoyee Wang, global head of RWA (real-world assets) and TradFi at Bybit.
In the US, Commodity Futures Trading Commission staff updated derivatives guidance on September 24, 2026, confirming swap dealers may use tokenized money market fund shares as margin collateral.
The guidance requires the underlying asset to meet applicable requirements and the tokens to carry the same or functionally equivalent legal and economic rights.
Canada builds regulated alternatives
Canadian institutions are developing their own tokenized collateral tools. BMO plans to let clients convert US dollars into a tokenized instrument for margined products at CME Group. It intends to offer the service to regulated financial firms in the second half of 2026, subject to regulatory approval.
On September 10, OSFI confirmed that tokenized deposits are not legally distinct from conventional deposits. On September 22, Canada’s six largest banks said they are jointly exploring a Canadian-dollar tokenized deposit system, with a longer-term aim of connecting to third-party digital asset projects.
Securities regulators are also examining tokenized products. The CSA held a tokenization workshop in Toronto on June 11, 2026. Later phases of its Project Tokenization could include a discussion paper or live testing of tokenized instruments.
Stablecoin rules remain unfinished. Canada’s Stablecoin Act passed but does not take effect until 2027. The Bank of Canada told the Senate that regulations could realistically arrive in mid- or late 2027.
Some leveraged crypto trading is now available to Canadians through a regulated platform. On September 2, Coinbase began offering futures to permitted Canadian clients, including institutional investors and qualified high-net-worth individuals, with leverage of up to 10x.
Client cash in a new role
In the Bybit structure, tokenized money market funds pledged as crypto collateral support trading credit lines. A holding normally used as a cash reserve stays tied to trading activity while it is pledged. Neither firm disclosed eligibility criteria, collateral haircuts or credit limits.
The collaboration also covers wallet-based investors. A tokenized wealth product on the Bybit exchange and the Mantle blockchain provides access to Franklin Templeton investment strategies; Bybit and Mantle will share details later. The firms also plan digital content and education programs on traditional investment strategies, goals-based investing and diversification.
“We’re excited to partner with Bybit to increase access to actively managed retail investment solutions that meet the evolving needs of the wallet ecosystem,” said Sandy Kaul, head of digital assets and innovation at Franklin Templeton.
She added that the arrangement gives institutions a regulated venue to deploy yield-bearing assets in digital markets.
The Bybit deal adds to Franklin Templeton’s other public blockchain mandates. The firm manages the US dollar and short-term Treasury reserves behind Wyoming’s $FRNT, a state-issued stable token that launched in January.
