Franklin Templeton expands its off-exchange collateral program to Bybit

Franklin Templeton is extending its off-exchange collateral program to Bybit, where investors and wallet holders on the exchange can pledge shares in its tokenized money market funds as collateral to borrow USDT or USDC and keep earning yield on the assets behind those shares. The shares represent about $686 million in net assets, according to the Monday release announcing the arrangement.

The arrangement turns on where the collateral sits: nothing moves to Bybit, because ByCustody, described in the release as a regulated custody platform, holds the underlying assets off-exchange and their value is mirrored into the exchange's trading environment, unlocking trading liquidity while the position keeps generating yield. The venue extends credit against collateral it does not custody; the holder keeps a fund position that stays in regulated accounts and keeps paying, and what a user relies on is the mirrored balance itself.

Bybit is the third venue on the same setup, following the tokenized money market funds Franklin Templeton already offers to Binance and OKX customers, so the increment here is coverage rather than a new market. Sandy Kaul, who heads digital assets and innovation at the firm, said in an interview that the arrangement lets an investor look across the top exchanges and use collateral more optimally while earning yield on it, describing that as "a critical unlock" for the ecosystem's growth. She also cast the wallet-based investing model as a reason for an asset manager to design products specifically for it.

The recordkeeping behind the shares belongs to Benji, Franklin Templeton's proprietary, blockchain-integrated transfer agency and recordkeeping platform, and Benji currently pays 3.7% annualized, based on the latest seven-day rate—that number is what the trade is made of. A stablecoin balance sitting at an exchange earns nothing; the same holder pledging money market shares against a USDT or USDC credit line gets paid on collateral already inside the trading account. Yield-bearing collateral crowding out zero-yield cash is the trade this publication flagged in August, when EDX Markets adopted Figure's YLDS as collateral and treasury, and the carry does not depend on what the borrowed stablecoins are used for.

Crypto.com and Deribit let eligible institutional and professional users put BlackRock's BUIDL fund behind trades, derivatives positions included, so Franklin Templeton is not alone in letting a fund balance do margin work. Its position is more vertical: it issues the fund, keeps the record on its own platform, and now runs the collateral program across three exchanges. An asset manager that owns the recordkeeping and the venue relationships is inserting itself between the wallet and the trading account, which is a different commercial seat than selling shares into a brokerage sweep.

Securitize's tokenized assets reached a record $4.3 billion in August while its tokenization fees shrank and its net loss widened, and the arithmetic points the same way Franklin Templeton is moving: issuance is getting cheaper faster than it is getting profitable, which shifts the returns toward the layer where a tokenized balance does something. Franklin Templeton's funds already exist and already yield, and Bybit hands them a second use inside a trading account; collateral mobility is where that contest is being decided.

The borrow side has its own timeline, because a credit line denominated in USDT or USDC depends on those stablecoins remaining usable, and Treasury's first rulemaking under the GENIUS Act proposes definitions and a comment schedule that will determine which issuers face U.S. rules. That work sits upstream of Franklin Templeton's program and outside its control, but it bears on the durability of the leg the asset manager does not issue.

The part the release leaves thin is the mirror. ByCustody holds the assets and Bybit shows their value, but the announcement does not describe how that value is verified or marked, or what a user's recourse looks like if the custodian's figure and the exchange's figure diverge—questions the market has been working through all year, as Bitget's aggregation of off-exchange collateral across four venues on a single bank's platform made segregation a costing item rather than a pitch. Franklin Templeton's addition puts an issuer's own fund shares on a plumbing standard that is still being written.

One figure deserves care. The $686 million is the net asset figure attached to the shares, not a measure of how much will be pledged; the release does not say what share of the pool is expected to move onto Bybit, what haircuts the venue applies, or what the borrowing costs are. Without those numbers, the program reads as a way to distribute Benji-issued shares rather than a settled collateral market.

The holder who matters is someone who already keeps a stablecoin balance at Bybit and has no way to earn on it. Pledging money market shares against a credit line gives that balance a yield and gives Franklin Templeton a wallet, but the release discloses no pledged balance, which is the figure that would show whether the trade is being taken.