Bybit Lets Institutions Trade Against Yield-Bearing Tokenized Funds

Bybit and Franklin Templeton announced Monday, September 28, that eligible institutional clients can now pledge tokenized shares of Franklin Templeton’s money market funds as trading collateral on the exchange. The shares, issued through Franklin Templeton’s Benji platform, stay in off-exchange custody the entire time, while the client gains access to a credit line for trading on Bybit.

Bybit and Franklin Templeton Expand Benji Collateral Use

The mechanics are straightforward. An eligible institution holding Benji-issued fund shares can pledge them as collateral without selling the position or moving the shares onto Bybit itself. In return, the client receives a credit line denominated in USDT or USDC, which can be deployed directly into trading on the exchange.

That structure matters because it lets institutions keep collecting yield on the underlying money market fund while simultaneously financing crypto trading activity – a dual use that neither a simple buy-and-hold position nor a plain stablecoin balance can offer. It’s a variation on a pattern already spreading across onchain markets, where tokenized traditional assets are increasingly used as collateral for onchain borrowing rather than sitting idle in a portfolio.

Franklin Templeton frames the arrangement as extending tokenized fund shares beyond a static investment product into an active piece of trading infrastructure. For institutions already holding Benji shares for treasury or cash-management purposes, the appeal is capital efficiency: the same asset now does double duty.

Tokenized Funds Enter a Growing Collateral Market

The tokenized money market fund category is not small, and it’s not new territory for exchanges chasing institutional flow. The Bank for International Settlements valued the market at more than $9 billion as of September 2025, and the space has only gotten more competitive since.

Franklin Templeton’s own Benji platform has seen its assets under management swing sharply – from $1.98 billion in April down to roughly $669 million more recently, according to data from RWA.xyz. That decline puts Benji well behind the category leader: BlackRock‘s USD Institutional Digital Liquidity Fund, known as BUIDL, remains the largest tokenized money market fund at $2.2 billion.

BUIDL is already accepted as collateral on Crypto.com and Deribit, and Binance allows its institutional clients to use it as off-exchange collateral as well. Bybit’s move with Franklin Templeton effectively brings a second major issuer into the same collateral race, giving institutions a choice of tokenized cash-equivalent products to fund trading rather than relying on a single provider. The broader push toward treating tokenized assets as functional collateral rather than passive holdings is also reshaping how derivatives desks think about margin, a dynamic tied to the growing use of tokenized assets as collateral in crypto markets more broadly.

How Off-Exchange Custody Changes the Structure

The custody design is the part institutions will care about most. Fund shares never leave off-exchange custody, and Bybit recognizes the value of those holdings to extend trading credit rather than requiring the assets to be transferred onto the exchange’s books.

That separation lets a client finance crypto trading activity without giving up the yield-bearing exposure of the underlying fund – the institution isn’t choosing between earning yield and having trading liquidity, it gets both from the same position. It’s worth being precise about who this applies to: the program is limited to eligible institutions, and Bybit has not indicated any extension to retail accounts or to its broader client base.

This kind of arrangement is becoming a recognizable template rather than a one-off. Similar structures pairing tokenized real-world assets with onchain borrowing have already shown up elsewhere, including cases where tokenized traditional assets serve as collateral for onchain borrowing on decentralized platforms, suggesting the off-exchange custody model is becoming the default way exchanges and asset managers link regulated products to crypto liquidity.

A Planned Wallet Product on Mantle

Beyond the institutional collateral program, Franklin Templeton and Bybit said they are planning a tokenized investment product aimed at wallet users, built on Bybit and the Mantle network. Details are thin – the companies have not disclosed a launch date, product composition, eligibility rules, or which jurisdictions might have access.

That’s worth flagging as a planned initiative rather than a live product; nothing about it is operational yet. It does, however, point toward a broader ambition to move tokenized fund exposure from an institutional-only collateral tool toward something wallet-based users could eventually access directly, following a pattern seen in other tokenized investment funds and portfolio strategies moving onchain for retail-adjacent audiences.

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