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🏦Franklin Templeton Exec: Digital Assets Are ‘Frontier Risk Alternatives’🏦
The $1.3 trillion fund group is playing with the idea of launching additional crypto strategies after debuting its crypto SMAs
October 30, 2022
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  • Future crypto products “could take many forms” based on how regulatory environment evolves, according to the firm’s head of digital assets
  • The firm’s clients are seeking a streamlined process to invest in this space

Franklin Templeton is exploring ways to bring additional digital asset investment strategies to market following the launch of its crypto-focused separately managed accounts (SMAs) last month.

Roger Bayston, the company’s segment lead, called digital assets “frontier risk alternatives” in a recent interview with Blockworks. 

Franklin Templeton had roughly $1.3 trillion in assets under management, as of Sept. 30. One of its new crypto-focused SMAs invests in 10 to 15 of the largest digital assets, excluding stablecoins and meme coins. Its other takes a similar approach, but bitcoin and ether are both capped at 25% of the portfolio.

The products come as institutional adoption of crypto is on the rise, according to a recent Fidelity survey, with 74% such investors saying they plan on buying digital assets in the future.

Bayston said in May that crypto was an asset class with “a great deal of thematic tailwinds,” as industries begin to unlock the potential of blockchain. 

More recently Sandy Kaul, Franklin Templeton’s senior vice president of digital assets and industry advisory services, published research about, in part, how decentralization is poised to disrupt traditional finance over the next decade. 

Blockworks checked back in with Bayston about what’s next.

Blockworks: Following the launch of crypto-focused SMAs, what other types of crypto offerings might the firm be looking to offer?

Bayston: We are committed to providing industry relevant opportunities to meet the evolving investment needs of our clients.

Our robust team of investment talent provides deep tokenomics research for our strategies, which are managed on a proprietary management platform built from the ground up. This gives us the expertise to offer the best advice and active management possible for our clients. 

We are continuing to develop delivery mechanisms to deliver digital asset investment strategies for a variety of investors.

Blockworks: Could these include more SMAs? How about crypto-related ETFs?

Our experienced investment team has created many portfolio strategies utilizing various degrees of discretionary decision-making and research intensity. 

Given the ripe field of innovation that blockchain technologies offer, you can expect Franklin Templeton to continue to bring relevant product ideas to the market. These products could take many forms based on current or future regulatory permissions.

Blockworks: What is the firm hearing from clients right now in regards to crypto? 

Bayston: We believe that digital assets are frontier risk alternatives – new investable opportunities that capture the return streams of novel business models and can generate long-term growth

We are seeing investors with a variety of interest, experience and exposure levels with these assets across the world and the desire for sound investment advice. 

We are hearing from clients on the need for a streamlined process to invest in this space, founded on deep asset research and professional portfolio management, in order to generate the highest capital appreciation with an eye on risk management.

Blockworks: What are your thoughts on the Ethereum Merge? How could it impact adoption?  

Bayston: The transition to a proof-of-stake protocol illustrates the continuous innovation we see with blockchains, but more specifically represents a major software upgrade for the network with the possibility for improved security and capital and energy efficiency. 

A resulting outcome of this event is a major reduction in Ethereum’s carbon footprint, which is desirable to appeal toward institutional ESG [environmental, social, governance] mandates. The evolution of Ethereum is an example of how this technology continues to evolve. Our investment platform will also evolve as the platforms grow and innovation in this space continues.

Blockworks: What crypto trends is Franklin Templeton most focused on right now?

Bayston: We believe that mass adoption of digital assets likely starts with the tokens themselves, and inclusion of these assets in investment portfolios will pave the way for other use cases for blockchain technology. 

The digital asset space can bring two broad themes to investment management: expanding the opportunity set for investment options to include the blockchains themselves or bringing assets on chain in a more fungible way, and using the blockchain rails to create operational efficiencies across traditional asset management processes.

Blockworks: What does the company expect from a crypto regulatory perspective in the coming months? How might it be engaging to influence policy in the segment?

Bayston: There is substantial global regulatory development with digital assets in a variety of geographies, and we believe regulators are conducting their due diligence to take a measured approach to regulation. 

We are comfortable navigating the global regulatory environment as it develops around the world.  We’re a collaborator with regulators, given our focus on providing the best advice and service to our clients and view that the future of asset management includes blockchain technology and digital assets.

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👉 "The justice department and the FBI are irredeemably compromised and corrupted.
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👉 Coinbase just launched an AI agent for Crypto Trading

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The future of Crypto x AI is about to go crazy.

👉 Here’s what you need to know:

💠 'Based Agent' enables creation of custom AI agents
💠 Users set up personalized agents in < 3 minutes
💠 Equipped w/ crypto wallet and on-chain functions
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1. Open Access: Democratized access to advanced trading
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👉 Coinbase just launched an AI agent for Crypto Trading

🎁 As of July 8th there have been 84 VERI SmartMetal NFT Activations (1.3%). With shipments ramping up, we witness the corresponding jump in activations.

Need help getting started? Check out our knowledge base to get the info you need: https://veridao.freshdesk.com/support/solutions/articles/51000487052-what-are-the-nft-activation-steps

👉Interested in which NFTs have been activated? Check them out here:
https://basescan.org/token/0x4516a5d613c30a36d157d3b579813734cbb929a4

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🚨BREAKING: The US House Committee on Financial Services says that next week the House will deliver on President Trump's call to make the US the "crypto capital of the world!

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Brinc Launches Web3 Accelerator with Octopus, XDC & IDA

Brinc Launches Web3 Accelerator with Octopus, XDC & IDA to Transform Hong Kong’s Loyalty and Payment Systems.

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🔗 Startups can apply from July 10

📅 Launching Sept 8

Learn more about the Web3 Accelerator program and apply now: https://www.brinc.io/stablecoin-accelerator/

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Musk Turns On Starlink to Save Iranians from Regime’s Internet Crackdown

Elon Musk, the world’s richest man and a visionary behind SpaceX, has flipped the switch on Starlink, delivering internet to Iranians amid a brutal regime crackdown.

This move comes on the heels of Israeli strikes targeting Iran’s nuclear facilities, as the Islamic Republic cuts off online access.

The former Department of Government Efficiency chief activated Starlink satellite internet service for Iranians on Saturday following the Islamic Republic's decision to impose nationwide internet restrictions.

As the Jerusalem Post reports, that the Islamic Republic’s Communications Ministry announced the move, stating, "In view of the special conditions of the country, temporary restrictions have been imposed on the country’s internet."

This action followed a series of Israeli attacks on Iranian targets.

Starlink, a SpaceX-developed satellite constellation, provides high-speed internet to regions with limited connectivity, such as remote areas or conflict zones.

Elizabeth MacDonald, a Fox News contributor, highlighted its impact, noting, "Elon Musk turning on Starlink for Iran in 2022 was a game changer. Starlink connects directly to SpaceX satellites, bypassing Iran’s ground infrastructure. That means even during government-imposed shutdowns or censorship, users can still get online, and reportedly more than 100,000 inside Iran are doing that."

During the 2022 "Woman, Life, Freedom" protests, Starlink enabled Iranians to communicate and share footage globally despite network blackouts," she added.

MacDonald also mentioned ongoing tests of "direct-to-cell" capabilities, which could allow smartphone connections without a dish, potentially expanding access and supporting free expression and protest coordination.

Musk confirmed the activation, noting on Saturday, "The beams are on."

This follows the regime’s internet shutdowns, which were triggered by Israeli military actions.

Adding to the tension, Israeli Prime Minister Benjamin Netanyahu addressed the Iranian people on Friday, urging resistance against the regime.

"Israel's fight is not against the Iranian people. Our fight is against the murderous Islamic regime that oppresses and impoverishes you,” he said.

Meanwhile, Reza Pahlavi, the exiled son of Iran’s last monarch, called on military and security forces to abandon the regime, accusing Supreme Leader Ayatollah Ali Khamenei in a Persian-language social media post of forcing Iranians into an unwanted war.

Starlink has been a beacon in other crises. Beyond Iran, Musk has leveraged Starlink to assist people during natural disasters and conflicts.

In the wake of hurricanes and earthquakes, Starlink has provided critical internet access to affected communities, enabling emergency communications and coordination.

Similarly, during the Ukraine-Russia conflict, Musk activated Starlink to support Ukrainian forces and civilians, ensuring they could maintain contact and access vital information under dire circumstances.

The genius entrepreneur, is throwing a lifeline to the oppressed in Iran, and the libs can’t stand it.

Conservative talk show host Mark Levin praised Musk’s action, reposting a message stating that Starlink would "reconnect the Iranian people with the internet and put the final nail in the coffin of the Iranian regime."

"God bless you, Elon. The Starlink beams are on in Iran!" Levin wrote.

Musk, who recently stepped down from leading the DOGE in the Trump administration, has apologized to President Trump for past criticisms, including his stance on the One Big Beautiful Bill.

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GENIUS Act lets State banks conduct some business nationwide. Regulators object

The Senate passed the GENIUS Act for stablecoins last week, but significant work remains before it becomes law. The House has a different bill, the STABLE Act, with notable differences that must be reconciled. State banking regulators have raised strong objections to a provision in the GENIUS Act that would allow state banks to operate nationwide without authorization from host states or a federal regulator.

The controversial clause permits a state bank with a regulated stablecoin subsidiary to provide money transmitter and custodial services in any other state. While host states can impose consumer protection laws, they cannot require the usual authorization and oversight typically needed for out-of-state banking operations.

The Conference of State Bank Supervisors welcomed some changes in the GENIUS Act but remains adamantly opposed to this particular provision. In a statement, CSBS said:

“Critical changes must be made during House consideration of the legislation to prevent unintended consequences and further mitigate financial stability risks. CSBS remains concerned with the dramatic and unsupported expansion of the authority of uninsured banks to conduct money transmission or custody activities nationwide without the approval or oversight of host state supervisors (Sec. 16(d)).”

The National Conference of State Legislatures expressed similar concerns in early June, stating:

“We urge you to oppose Section 16(d) and support state authority to regulate financial services in a manner that reflects local conditions, priorities and risk tolerances. Preserving the dual banking system and respecting state autonomy is essential to the safety, soundness and diversity of our nation’s financial sector.”

Evolution of nationwide authorization

Section 16 addresses several issues beyond stablecoins, including preventing a recurrence of the SEC’s SAB 121, which forced crypto assets held in custody onto balance sheets. However, the nationwide authorization subsection was added after the legislation cleared the Senate Banking Committee, with two significant modifications since then.

Originally, the provision applied only to special bank charters like Wyoming’s Special Purpose Depository Institutions or Connecticut’s Innovation Banks. Examples include crypto-focused Custodia Bank and crypto exchange Kraken in Wyoming, plus traditional finance player Fnality US in Connecticut. Recently the scope was expanded to cover most state chartered banks with stablecoin subsidiaries, possibly due to concerns about competitive advantages.

Simultaneously, the clause was substantially tightened. The initial version allowed state chartered banks to provide money transmission and custody services nationwide for any type of asset, which would include cryptocurrencies. Now these activities can only be conducted by the stablecoin subsidiary, and while Section 16(d) doesn’t explicitly limit services to stablecoins, the GENIUS Act currently restricts issuers to stablecoin related activities.

However, the House STABLE Act takes a more permissive approach, allowing regulators to decide which non-stablecoin activities are permitted. If the House version prevails in reconciliation, it could result in a significant expansion of allowed nationwide banking activities beyond stablecoins.

Is it that bad?

As originally drafted, the clause seemed overly permissive.

The amended clause makes sense for stablecoin issuers. They want to have a single regulator and be able to provide the stablecoin services throughout the United States. But it also leans into the perception outside of crypto that this is just another form of regulatory arbitrage.

The controversy over Section 16(d) reflects concerns about creating a regulatory gap that allows banks to operate interstate without the oversight typically required from either federal or state authorities. As the two Congressional chambers work toward reconciliation, lawmakers must decide whether stablecoin legislation should include provisions that effectively reduce traditional banking oversight requirements.

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Dubai regulator VARA classifies RWA issuance as licensed activity
Virtual Asset Regulatory Authority (VARA) leads global regulatory framework - makes RWA issuance licensed activity in Dubai.

Real-world assets (RWAs) issuance is now licensed activity in Dubai.

~ Actual law.
~ Not a legal gray zone.
~ Not a whitepaper fantasy.

RWA issuance and listing on secondary markets is defined under binding crypto regulation.

It’s execution by Dubai.

Irina Heaver explained:

“RWA issuance is no longer theoretical. It’s now a regulatory reality.”

VARA defined:

- RWAs are classified as Asset-Referenced Virtual Assets (ARVAs)

- Secondary market trading is permitted under VARA license

- Issuers need capital, audits, and legal disclosures

- Regulated broker-dealers and exchanges can now onboard and trade them

This closes the gap that killed STOs in 2018.

No more tokenization without venues.
No more assets without liquidity.

UAE is doing what Switzerland, Singapore, and Europe still haven’t:

Creating enforceable frameworks for RWA tokenization that actually work.

Matthew White, CEO of VARA, said it perfectly:

“Tokenization will redefine global finance in 2025.”

He’s not exaggerating.

$500B+ market predicted next year.

And the UAE just gave it legal rails.

~Real estate.
~Private credit.
~Shariah-compliant products.

Everything is in play.

This is how you turn hype into infrastructure.

What Dubai is doing now is 3 years ahead of everyone else.

Founders, investors, ecosystem builders:

You want to build real-world assets onchain.

Don’t waste another year waiting for clarity.

Come to Dubai.

It’s already here.

 

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🙏 Donations Accepted 🙏

If you find value in my content, consider showing your support via:

💳 PayPal: 
1) Simply scan the QR code below 📲
2) or visit https://www.paypal.me/thedinarian

🔗 Crypto – Support via Coinbase Wallet to: [email protected]

Or Buy me a coffee: https://buymeacoffee.com/thedinarian

Your generosity keeps this mission alive, for all! Namasté 🙏 Crypto Michael ⚡  The Dinarian

 

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