TL;DR: Franklin Templeton has filed exchange registrations for two stock-and-Bitcoin ETFs. Their strategy redirects equity dividends into crypto exposure, with portfolio rules designed to keep Bitcoin a minority allocation.

Franklin Templeton is moving closer to offering investors a way to combine a US stock portfolio with an automatic Bitcoin allocation. The idea uses dividend reinvestment to build crypto exposure, while periodically trimming it back.

An October 22 Form 8-A registers shares of the Franklin US Equity Bitcoin DRIP Index ETF and Franklin US Innovation Bitcoin DRIP Index ETF for Nasdaq. The filing is an exchange-registration step; it does not establish that either fund has begun trading.

For investors, the appeal would be operational simplicity. One fund could handle both the equity portfolio and the rules governing its smaller Bitcoin component, avoiding a separate decision each time a dividend arrives.

Dividends Build Exposure, Rebalancing Cuts It Back

The accompanying prospectus filing proposes an October 27 effective date. It gives the equity version the ticker FBEQ and the innovation version FIBT, with annual management fees of 0.09% and 0.19%, respectively.

The VettaFi indexes started with 95% equities and 5% Bitcoin. Their dividend mechanism reinvests regular and special equity dividends into Bitcoin at the following day’s open after the ex-dividend date.

At quarterly rebalancing, a Bitcoin weighting above 5% is reduced to 4.5%. A separate breach above 20% between reviews triggers a reset to 4.5% at the close of the second following business day. That is a corrective rule, not a guarantee the allocation can never temporarily exceed 20%.

The funds can use Bitcoin-linked investment products and derivatives to reproduce the index exposure. A shareholder would own ETF shares, rather than receive coins in a personal wallet.

Economically, this makes the reinvestment decision part of the product. Dividends are still money belonging to the portfolio. Redirecting them into another asset does not create an extra return by itself, and a lower entry cost for that asset does not guarantee a profitable exit.

A Different Role From A Dedicated Bitcoin Fund

Franklin already offers a more concentrated route through its Bitcoin ETF, EZBC. The issuer describes that product as holding Bitcoin and cash, making its value closely dependent on the coin’s market performance.

The proposed DRIP funds would instead leave most of the investment tied to equities. That means stock selection and the behaviour of the chosen benchmark could matter more to the overall return than a modest move in Bitcoin.

The wrapper also changes the practical meaning of custody. Investors trade fund shares through an exchange; they are not managing the keys or selecting each Bitcoin-related instrument themselves.

The next milestone is the funds becoming effective and opening for trading. Until then, the filings describe a planned allocation strategy, with fees and safeguards to examine, rather than a live track record showing how it performs.

Written by the News Desk and edited by Samuel Rae.

Bitcoin Magazine

Franklin Templeton Clears Final Hurdle For ETFs That Turn Stock Dividends Into Bitcoin

Franklin Templeton has taken the last regulatory step before launching two exchange-traded funds that convert stock dividends into bitcoin. 

On October 22, Franklin Templeton filed a Form 8-A with the Securities and Exchange Commission to register shares of the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF for trading on the Nasdaq. A prospectus filed the same day lists an effective date of October 27.

The filings for both funds arrived in June without tickers or fees. Four months later, the details are in.

How the funds work

The Equity fund, ticker FBEQ, tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index. The index holds the 500 largest U.S. companies by market capitalization, weighted by float-adjusted market cap. 

As of September 30, it held 499 stocks ranging from $10.2 billion to $5.5 trillion in size, with a concentration in information technology.

At inception, the index allocates 95% to those stocks and 5% to bitcoin. Each dividend the companies pay, regular or special, is reinvested into bitcoin at the market open on the day after the ex-date. The bitcoin share of the portfolio grows with each payment.

A traditional dividend reinvestment plan, or DRIP, buys more shares of the company that paid the dividend. Franklin’s version routes that cash into bitcoin. 

For a holder, the dividend stream from the largest companies in America becomes a recurring bitcoin purchase, with no exchange account, no wallet and no custody decisions.

The bitcoin position has limits. At each quarterly rebalance, an allocation above 5% is trimmed to 4.5%. If bitcoin exceeds 20% of the index between rebalances, it is cut back to 4.5% within two business days, and the proceeds return to stocks. The result is a stock fund with a bitcoin sleeve, not a bitcoin fund.

The ETF does not hold bitcoin on-chain. It gains exposure through bitcoin exchange-traded products, including Franklin’s own spot fund, through bitcoin futures and options, or through depositary receipts, in some cases via a Cayman Islands subsidiary.

FBEQ carries a 0.09% expense ratio with no 12b-1 fee. Franklin Advisory Services manages the fund, with Franklin Templeton Institutional as sub-advisor. Dina Ting, Hailey Harris, Joe Diederich and Basit Amin serve as portfolio managers.

The Innovation fund follows the same mechanic on the VettaFi US Innovation 100 Bitcoin DRIP Index, which draws from the 100 largest non-financial companies listed on the Nasdaq.

A deeper bet on bitcoin

Franklin Templeton filed for a spot bitcoin ETF in September 2023 and launched it as EZBC in January 2024. In April, the firm acquired 250 Digital and formed Franklin Crypto, an institutional digital asset division. Franklin Templeton CEO Jenny Johnson has argued that blockchains threaten Wall Street’s fee structure more than its technology.

The DRIP funds extend that strategy to investors who may never buy bitcoin on their own. A retiree holding an S&P 500-style fund in a brokerage account can, through FBEQ, let dividends from the companies she already owns build a bitcoin position over years.

The prospectus warns that investors can lose money, and that bitcoin’s price swings may affect the fund’s net asset value. Whether that trade-off appeals to the audience Franklin Templeton is targeting will become clear after October 27.

This post Franklin Templeton Clears Final Hurdle For ETFs That Turn Stock Dividends Into Bitcoin first appeared on Bitcoin Magazine and is written by Micah Zimmerman.

TL;DR

• Bybit and Franklin Templeton have launched an off-exchange collateral program for eligible institutional clients.
• Tokenized money-market fund shares issued through Franklin Templeton’s Benji platform can be pledged while clients trade on Bybit.
• The structure lets institutions keep collateral in regulated custody rather than moving the assets directly onto the exchange.

Bybit is giving institutional traders a way to use tokenized fund shares as collateral without depositing those assets directly onto the exchange.

The crypto platform announced a strategic collaboration with Franklin Templeton on September 28, starting with an off-exchange collateral program built around tokenized money-market fund shares issued through Franklin Templeton’s Benji platform.

Collateral Can Stay Outside The Exchange

The structure is aimed at eligible institutional clients.

Rather than transferring all of their collateral into an exchange account, participants can hold qualifying tokenized fund shares through the supported custody structure and pledge them against trading activity on Bybit.

That is important for large investors.

Keeping assets off an exchange can reduce counterparty exposure and allow collateral to continue generating the yield associated with the underlying money-market fund.

Bybit gains access to the collateral value without needing the institution to turn the entire position into cash or stablecoins first.

Franklin Templeton’s Benji platform provides the blockchain-integrated recordkeeping and transfer infrastructure for the tokenized fund shares.

Tokenized Funds Are Becoming Trading Infrastructure

Tokenized money-market funds initially attracted attention as a way to hold Treasury-like assets onchain.

Their next use may be more consequential.

They can become collateral.

A fund share that earns yield while sitting idle is useful.

A fund share that can simultaneously support a trading position becomes part of market infrastructure.

That is the direction several crypto and traditional-finance companies are now pursuing.

The Bybit integration also shows why off-exchange collateral has become increasingly important after a series of large exchange failures and security incidents.

Institutional traders want access to liquidity and derivatives markets.

They do not necessarily want every dollar of collateral sitting inside the trading venue itself.

Separating custody from execution can reduce that concentration of risk.

The collaboration extends beyond the initial collateral program.

Bybit and Franklin Templeton say they also plan to explore additional tokenized investment and yield products for wallet-based users.

Those future products should not be confused with what is live today.

The concrete first step is narrower and more institutional.

Eligible clients can use tokenized money-market fund shares as off-exchange collateral while trading on Bybit.

That turns tokenization from something investors merely hold into something they can actively finance against.

This article was written by the News Desk and edited by Samuel Rae.