Franklin Templeton expands its tokenized collateral service to Bybit PANew

PANews reported on September 28, citing CoinDesk, that Franklin Templeton has extended its off-exchange collateral program to Bybit. The move lets Bybit users use shares of Franklin Templeton's tokenized money market fund as collateral for crypto trading. The shares represent about $686 million in net assets.

Tokenized fund shares are digital representations of ownership in a fund structure. A money market fund is typically associated with short-term instruments and a stable-value objective, though the exact design depends on the specific product. The net-asset figure indicates the scale of the fund assets being referenced, not a new borrowing limit, trading volume, or performance claim.

How the collateral service works

Users can borrow USDT or USDC against the tokenized fund shares while the underlying assets keep generating yield. They do not need to transfer the assets to Bybit. ByCustody, a regulated custody platform, will hold the assets off exchange. Their value is mirrored in Bybit's trading environment, giving users transaction liquidity without removing the assets from custody.

This structure separates asset ownership from trading usability. The fund shares stay with a regulated custody provider, while Bybit reflects their value so users can participate in borrowing and trading workflows. USDT and USDC are stablecoin formats commonly used as liquid instruments in crypto markets. Borrowing against collateral can allow traders to access liquidity for trading needs without selling the fund shares. If the underlying assets continue producing returns, the collateral may retain an economic benefit even while being used to support a loan. The off-exchange model also highlights a custody-first approach, where the trading venue does not necessarily need to directly hold the collateralized asset.

What the extension means

The arrangement shows a wider pattern for Franklin Templeton. The firm has already provided similar services to customers of Binance and OKX. For traders, the key change is access: collateral can support borrowing while the fund remains a yield-bearing asset. For exchanges, the model connects regulated custody with tokenized fund access inside crypto markets.

Expanding the service to Bybit suggests that tokenized fund products are being integrated across multiple crypto trading environments. For Bybit users, the practical effect is that a fund product can be referenced as collateral within a crypto-native trading setting. For exchanges, such arrangements may create a bridge between regulated custody infrastructure and digital-asset market workflows. The model also reflects a broader industry interest in collateral mobility: assets can be made usable for trading while remaining under custody and retaining fund characteristics. Because the fund shares are not moved onto the exchange, the arrangement depends on accurate valuation mirroring, reliable custody controls, and clear borrower obligations.

Risk Warning

This article is provided for informational purposes and does not constitute financial advice. Tokenized fund shares, stablecoin borrowing, and off-exchange custody arrangements involve multiple operational and market risks. Collateral values may change, borrowing terms may vary, and liquidity may not be available under all conditions. Custody arrangements, technical systems, valuation mirroring, and regulatory frameworks can introduce additional considerations. Users should review product terms, assess their own risk tolerance, and seek independent professional advice before using tokenized assets as collateral or borrowing stablecoins.

Using tokenized collateral can also involve account-level risk, because borrowing positions may require sufficient collateral value. Stablecoin borrowing introduces separate stablecoin market conditions. Off-exchange custody may create operational dependencies between custody, valuation, and trading platforms.