Bybit announced on September 28 that it has formed a strategic collaboration with Franklin Templeton to let eligible institutional clients use tokenized money-market-fund shares as off-exchange collateral for trading on the crypto exchange. The structure allows clients to pledge Benji-issued fund shares through ByCustody in return for USDT or USDC trading credit lines, rather than moving the underlying fund assets onto Bybit.
The arrangement places a tokenized investment product into the collateral workflow for institutional trading. The pledged assets remain in custody outside the exchange and continue generating yield, according to Bybit’s announcement.
The service is limited to eligible institutional clients. Neither the announcement nor the information provided with the collaboration specifies the terms on which credit is extended, the amount of credit available, or the fund-share valuation parameters used in the collateral arrangement.
Benji fund shares become off-exchange collateral on Bybit
Eligible institutional clients can pledge Benji-issued fund shares through ByCustody as off-exchange collateral for trading on Bybit, receiving credit lines denominated in USDT or USDC. The shares are not converted into those stablecoins; they are pledged to support the credit facility while remaining in custody off the exchange.
Cointelegraph reported that institutions can use the tokenized shares as collateral without transferring them onto Bybit, expanding their use beyond holding them as an investment.
From idle collateral to yield-bearing collateral
The central feature of the structure is that institutions can seek trading credit without giving up off-exchange custody of the underlying Benji fund shares. Bybit said those assets continue to generate yield while they are pledged.
That distinction matters because collateral can otherwise sit apart from an investor’s income-producing allocation while it supports trading activity. Here, the collateral and the credit line perform different functions: the fund shares remain the pledged investment asset, while USDT or USDC credit is supplied for use on Bybit.
For eligible institutions, the arrangement creates a different collateral pathway: tokenized money-market-fund shares can serve as the basis for collateral without an on-exchange transfer of those shares. The announced arrangement specifically concerns the shares issued through Franklin Templeton’s Benji system and the ByCustody route; it does not claim that trading is risk-free or that collateral values are fixed.
It also gives tokenized fund units a role beyond a buy-and-hold position. Cointelegraph characterized the development as an expansion of tokenized fund shares into collateral use, with the off-exchange custody component preserving the distinction between where the assets are held and where trading takes place.
Franklin Templeton’s Benji platform supplies the fund infrastructure
Franklin Templeton’s Benji Technology Platform is the infrastructure behind the collateral referenced by Bybit. It supports blockchain-based recordkeeping and transfer-agency functions for tokenized investment products, according to a Franklin Templeton release.
The product is the Franklin OnChain U.S. Government Money Fund, represented by the BENJI token. Franklin Templeton says it launched in 2021 as the first U.S.-registered mutual fund to use a public blockchain as its official system of record.
Under the Bybit arrangement, those Benji-issued fund shares are pledged through ByCustody for the exchange’s trading-credit mechanism. The fund assets stay in custody off Bybit and continue generating yield; the institution instead accesses USDT or USDC credit for trading on the exchange.
That makes the collaboration an extension of tokenized fund shares into institutional trading collateral, with the custody of the underlying assets separated from the trading-credit access.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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