Franklin Templeton has registered two Bitcoin dividend reinvestment ETFs for Nasdaq trading, bringing the $1.8 trillion asset manager closer to launching funds that automatically convert stock dividends into Bitcoin exposure.
Summary
- Franklin Templeton has registered two Bitcoin DRIP ETFs for Nasdaq trading under the proposed tickers FBEQ and FIBT, although a launch date has not been announced.
- Both funds will initially allocate 95% to US stocks and 5% to Bitcoin investments, with stock dividends used to gradually build BTC exposure.
- Bitcoin exposure will be capped at 20%, while quarterly rebalancing will reduce allocations above 5% to 4.5%.
- The two ETFs will charge an annual management fee of 0.09%, with their stock holdings drawn from separate large company and innovation focused indexes.
According to an October 22 SEC filing, the Franklin US Equity Bitcoin DRIP Index ETF and Franklin US Innovation Bitcoin DRIP Index ETF have completed their securities registration under Section 12(b) of the Securities Exchange Act of 1934.
The funds are expected to trade under the tickers FBEQ and FIBT, respectively, although the filing does not specify when trading will begin.
Both ETFs will invest primarily in US stocks while using dividends generated by those holdings to accumulate Bitcoin exposure through exchange traded products and other eligible instruments.
Franklin Templeton first proposed the products in June, when it filed plans for two ETFs that would reinvest equity dividends into Bitcoin. The company subsequently amended its registration documents several times before completing the latest filing.
How Franklin Templeton’s Bitcoin DRIP ETFs will work
The two funds will track separate indexes developed by VettaFi, with both initially allocating 95% of their portfolios to US equities and the remaining 5% to Bitcoin related investments.
The Franklin US Equity Bitcoin DRIP Index ETF will follow the VettaFi US Large-Cap 500 Bitcoin DRIP Index, which draws its stock holdings from a universe of 500 major publicly traded US companies.
Meanwhile, the Franklin US Innovation Bitcoin DRIP Index ETF will focus on 100 large US companies selected from an innovation-oriented Nasdaq stock universe.
Although the equity holdings will differ, both funds will follow the same dividend reinvestment strategy.
Regular and special dividends paid by the underlying stocks will be directed toward Bitcoin exposure on the business day following the relevant ex-dividend date.
The strategy will allow the Bitcoin allocation to grow as companies distribute dividends, with the resulting exposure held through eligible Bitcoin investment products.
Investors will continue holding shares in the ETFs instead of receiving Bitcoin directly. The value of those shares will depend on the performance of the underlying equities and Bitcoin related instruments.
Both ETFs will charge an annual management fee of 0.09%, according to the proposed fund terms.
Bitcoin allocation will be capped at 20%
Franklin Templeton has included specific allocation limits to control how much Bitcoin exposure the funds can accumulate over time.
During quarterly rebalancing, any Bitcoin allocation exceeding 5% will be reduced to 4.5%, with the remaining portfolio weight allocated to equities.
A separate rule applies if Bitcoin exposure exceeds 20% between scheduled reviews. In such cases, the allocation will be reduced to 4.5% at the close of the second business day following the breach.
The indexes will use the Kaiko Bitcoin New York Reference Rate at 4 p.m. Eastern Time to determine Bitcoin valuations.
Franklin Templeton has identified cryptocurrency volatility, transaction costs, custody risks and potential regulatory changes among the factors that could affect the funds’ performance.
Franklin Templeton expands its crypto investment business
The new ETF registrations follow several developments in Franklin Templeton’s digital asset business, including efforts to make its tokenized investment products available through conventional funds and cryptocurrency trading platforms.
In August, the asset manager received SEC staff clearance allowing its registered mutual funds and ETFs to invest in the Franklin OnChain U.S. Government Money Fund, known as BENJI, through a proposed custody arrangement.
As crypto.news previously reported, the no-action relief addressed custody requirements under the Investment Company Act of 1940, with Franklin Templeton retaining control of the blockchain wallets and private keys used by participating funds.
The company subsequently partnered with Bybit in September to allow eligible institutional clients to pledge BENJI fund shares as off-exchange collateral for USDT and USDC trading credit lines.
Franklin Templeton CEO Jenny Johnson later discussed the company’s tokenization approach at TOKEN2049 Singapore, where she criticized competing models that create digital copies of conventional securities without using blockchain as the primary recordkeeping system.
The asset manager had previously integrated BENJI with MoonPay Trade in June, allowing institutional clients to exchange supported stablecoins for tokenized money market fund exposure.
Franklin Templeton already operates the Franklin Bitcoin ETF, which trades under the ticker EZBC and provides investors with direct exposure to Bitcoin.
According to the supplied October 22 market figures, EZBC had attracted approximately $335 million in cumulative net inflows, including $7.3 million during Wednesday’s trading session.
Bitcoin, meanwhile, traded below $81,500 on October 23, while reported 24-hour trading volume fell 33% amid an options expiry.