Franklin Templeton has extended its off-exchange collateral program to Bybit, letting users of the exchange pledge shares in its tokenized money market funds — representing roughly $686 million in net assets — as collateral to borrow USDT or USDC, according to a press release issued Monday.

The arrangement keeps the underlying assets off the exchange entirely. ByCustody, a regulated custody platform, will hold the fund shares, while their value is mirrored inside Bybit's trading environment. Users pledge the mirrored value to access stablecoin trading credit lines and continue earning yield on the underlying assets, the release said.

Franklin Templeton issues the shares through the Benji Technology Platform, its proprietary blockchain-integrated record-keeping and transfer agency infrastructure. Benji currently pays a 3.7% annualized yield, based on the latest seven-day rate.

What does the structure change for traders?

The operational detail matters more than the headline. Users do not move assets onto Bybit's balance sheet. Instead, the collateral sits with a regulated custodian, and Bybit extends trading liquidity against the mirrored value.

For traders, that means:

• Fund shares remain in custody while backing USDT or USDC credit lines on Bybit.
• Yield on the underlying money market assets continues to accrue during the borrowing period.
• Counterparty exposure to the exchange is reduced because the assets never transfer on-chain to Bybit-controlled wallets.

The model targets a persistent pain point in crypto trading: collateral posted to exchanges historically earned nothing and sat exposed to platform risk. Tokenized money market shares held off-exchange aim to solve both problems at once.

Is this Franklin Templeton's first such deal?

No. The firm already offers its tokenized money market funds as collateral to customers of Binance and OKX. Monday's announcement makes Bybit the third major exchange to join the program and deepens the coverage across top-tier venues.

Sandy Kaul, Head of Digital Assets and Innovation at Franklin Templeton, framed the expansion as a portfolio-level unlock for investors active across multiple platforms.

"So now I'm able to really look across the top exchanges and be able as an investor to use my collateral more optimally while earning yield on it," Kaul said in an interview. "That to me is a critical unlock to really allow the ecosystem to grow. It's also a wonderful opportunity for us as an asset manager to be designing products specifically for this wallet-based investing channel."

Her last point signals the product roadmap: Franklin Templeton views exchange-embedded collateral not as a one-off integration but as a distribution channel for purpose-built funds serving wallet-native investors.

How does the move fit the wider market?

The Bybit rollout reflects a broader pattern across crypto trading venues. Several platforms now accept tokenized funds as trading collateral. Crypto.com and Deribit, for example, allow eligible institutional and professional users to back trades — including derivatives positions — with BlackRock's BUIDL fund.

The common thread is institutional collateral mobility. Tokenized money market funds combine same-day liquidity, regulated fund structures and on-chain transferability, which makes them increasingly attractive as margin assets for professional trading desks.

For Bybit, accepting Benji shares broadens the range of collateral its institutional users can deploy without unwinding yield-bearing positions. For Franklin Templeton, each new venue expands the addressable base for Benji-platform products and reinforces the asset manager's position in tokenized fund distribution.

The expansion also fits the wider trajectory of stablecoin-adjacent infrastructure moving into regulated finance, with Asia-Pacific markets serving as a key proving ground for these arrangements. As more exchanges add tokenized fund collateral and custody integrations mature, off-exchange collateral mirroring is positioned to become a standard feature of institutional crypto trading rather than a differentiator.