One of the world’s largest asset management companies, Franklin Templeton, has announced they will run a government debt fund that records the ownership of units in the fund on the Stellar Lumens blockchain, September 3, 2019. The fund will not invest in cryptocurrency, rather, it will utilize the immutable nature of distributed ledger technology to ensure ownership data cannot be altered.
Blockchain, Not Crypto?
Given the fact that regulation in the United States is becoming inconvenient and unclear, it isn’t surprising that isn’t Franklin Templeton announcing a crypto fund.
However, they have found a way to leverage the power of public blockchains without throwing themselves under the SECs bus.
The fund will invest most of its assets in government bonds, cash, and repurchase contracts that are backed by the fiduciary power of the government. It seeks to maintain a stable one dollar share price, as the goal of this fund is to offer investors fixed income through interest accrued from the bonds.
Franklin Templeton will maintain their own ledger as well, so the record on the Stellar ledger is so that the public can verify share ownership in the scheme. They have hinted that, in the future, they may shift record-keeping solely to the Stellar Lumens blockchain.
Transfers are initiated through cryptographic signing and shared ownership will be recorded over the blockchain, so in a way, it exists as a balance of XLM. For this reason, Franklin Templeton has hired a third-party custodian to hold each customer’s private keys over the chain. On-chain redemption still isn’t possible in this scenario.
Setting the Standard
Seeing an asset management firm with assets under management (AUM) of nearly $800 billion on a public blockchain for record-keeping is revolutionary.
It shows that there are players in the industry that understand the need to shift to a transparent method of bookkeeping so that customers can verify the information for themselves.
In a way, by allowing them to verify data for themselves, Franklin will end up gaining more trust from their customers.
Seeing whether other investment firms gravitate towards this standard will be an interesting byproduct of this, although it is unlikely that a majority of them will consider such an option due to the slight push on costs.