Franklin Templeton said that it updated two Western Asset institutional money market funds to align with U.S. stablecoin reserve requirements under the GENIUS Act. The changes position SEC-registered cash products as ready-to-use collateral for stablecoin issuers while adding on-chain rails for ownership and transfer.
The update targets a practical bottleneck for payment stablecoins and bank-style stablecoin programs: sourcing high-quality, liquid reserves that match the GENIUS Act’s reserve expectations while remaining operationally compatible with tokenized workflows. It also lands as stablecoins scale from roughly $310 billion in supply toward multi-trillion projections for 2030, increasing demand for standardized reserve assets.
Fund changes built for stablecoin reserve eligibility
Franklin Templeton reconfigured the Western Asset Institutional Treasury Obligations Fund (LUIXX) to invest exclusively in U.S. Treasury obligations with maturities of 93 days or less. That structure is designed to align the fund’s holdings with GENIUS Act reserve criteria and make the vehicle straightforward collateral for payment stablecoins and regulated issuers.
In parallel, the Western Asset Institutional Treasury Reserves Fund (DIGXX) introduced a new Digital Institutional share class for distribution via blockchain-intermediated platforms. The share class keeps the fund under SEC Rule 2a-7 while enabling approved intermediaries to record and transfer ownership on distributed ledgers, supporting shorter settlement cycles and 24/7 transaction workflows.
These two changes address both sides of the stablecoin reserve equation: asset quality and operational movement. Short-dated Treasuries meet the “high-quality, liquid reserves” requirement, while blockchain distribution supports the custody and transfer expectations many digital-rail programs rely on.
Operational lift for issuers, treasuries, and compliance teams
Roger Bayston, Franklin Templeton’s Head of Digital Assets, emphasized accessibility and interoperability, saying traditional funds are moving on-chain and the focus is to make them more usable. The message to the market is that tokenized distribution can coexist with legacy fund governance rather than replacing it.
For stablecoin issuers and treasury groups, the operational implications are immediate: reserve segregation and custody workflows must be updated, 1:1 reserve traceability must be validated, and settlement/reconciliation processes must be tested with blockchain intermediaries. Continuous settlement windows introduce new control requirements for monitoring, exception handling, and reporting readiness.
From an institutional liquidity perspective, the initiative is framed as reducing friction by letting issuers use familiar, SEC-registered government-only products instead of bespoke instruments. Matt Jones, Head of Institutional Liquidity, described the enhancements as enabling institutions to deploy tokenized infrastructure with familiar tools. That positioning is meant to lower adoption barriers while keeping compliance posture recognizable to traditional stakeholders.
As adoption develops, attention will concentrate on how issuers integrate these funds into reserve architectures and whether demand accelerates for short-duration, high-quality collateral. Treasury and compliance teams should expect governance, reporting, and operational playbooks to evolve as tokenized distribution moves from controlled pilots into production-grade payment and settlement workflows.
