From Stablecoins to Tokenized Markets: Franklin Templeton’s Sandy Kaul on the Future of Money
Sandy Kaul is the Executive Vice President and Head of Innovation at Franklin Templeton, the OG global asset manager when it comes to tokenization and digital assets.
In this conversation, we dive into the newly passed Genius Act and what it means for stablecoins, banks, and the future of cash. We explore Franklin Templeton’s journey launching BENJI, their tokenized money market fund, way back in 2019, long before most firms were paying attention to digital assets. We also dig into Sandy’s views on consumer accounts, payments, and investments in an on-chain world.
Will:
It’s great to connect — and great to see you, as always. I’m glad we’re doing this on the record for once.
Sandy:
Yes, now we can actually share our conversation with others instead of just enjoying it ourselves.
Will:
Excellent. Well, maybe the place to start is with Genius.
It was recently passed and signed into law, and I think it does a lot to formalize much of the work many of us have collectively been doing over the past several years.
It also seems to provide a strong framework — not just for stablecoin issuers, but for regulated institutions and financial firms that may want to work with stablecoins.
I’d love to hear your take. What’s your view on Genius, and what kind of impact do you think it will have?
Sandy:
I'm with you — I'm genuinely excited about the Genius Act, primarily because I think it's putting a real stamp of approval on this space and opening the door for a broader range of regulated players to get comfortable with the idea that we’re building an alternative, wallet-based ecosystem.
In this emerging system, stablecoins are starting to play the role of cash — which wasn’t necessarily the original expectation. When stablecoins were first developed, the assumption was that they’d function mainly as on- and off-ramps — a way to move in and out of the traditional financial system. The thinking was that money would pass through the wallet ecosystem and return to the traditional economy.
But that’s not what we’re seeing. The vast majority of stablecoin holders aren’t cashing out. They're leaving their stablecoins in their wallets, ready to use for their next transaction.
That changes the game. Genius gives us confidence that this ecosystem is not only here to stay, but poised for growth. It introduces a legal and regulatory framework that supports consumer protection, provides transparency around stablecoin backing, and establishes oversight of issuers — all of which will build trust and legitimacy in using these instruments.
The one unresolved issue — or perhaps loophole — is around whether stablecoins should be allowed to pay yield from their collateral pools back to holders.
There’s significant pushback from the banking sector on this point, and understandably so. Yield-bearing stablecoins put banks at a disadvantage. Banks rely on the yield from cash deposits to support lending — a core part of how they provide credit to the economy. If stablecoins redirect that yield to token holders, banks are left without the cash they need to fund lending.
So banks are pushing hard to close that gap. And we actually support that view. If you're designing a cash-equivalent instrument, it should behave like cash — not cash plus a return.
There’s already an instrument for cash-plus-return: it’s called a money market fund, and it’s a regulated security.
So we believe it's critical to maintain clear boundaries between those two instruments, so each can perform its intended function within the evolving wallet-based financial system.
Will:
A lot of that really resonates with me.
One of the most important aspects of the Genius Act, in my view, is that by formally recognizing stablecoins within the financial system, we’re effectively legitimizing the movement of value onto upgraded, instant-settlement rails.
Up to this point, crypto has largely existed outside the traditional financial system — operating as something separate. Some participants have moved back and forth between the two, but they've always been fundamentally distinct ecosystems.
I think a lot of the work people like you, people like me, and others in the space have been doing over the past few years has been built on a shared premise:
Blockchains are simply better value transfer rails than traditional financial infrastructure.
On-chain, there’s no such thing as T+1 or T+2 settlement — transactions clear in real time. And because the system is programmable, everything can be managed by software.
Any asset or store of value represented as a token can be transferred instantly, 24/7, to any participant in the network, regardless of location.
That functionality has served the crypto space well — and increasingly, we’re seeing an opportunity to extend that infrastructure into broader financial markets.
In that sense, stablecoins are the first step. They allow people to port cash from traditional payment rails to modern, instant-settlement infrastructure.
And once cash moves over, people start to use it for a range of needs — from investing and generating yield to all kinds of financial activity.
That naturally leads into the work you and Franklin Templeton have been doing around the tokenization of investment products.
It feels like a direct continuation of this infrastructure shift. I’d love for you to connect those dots for us.
Sandy:
Absolutely. First, we believe that investing and transacting within a wallet-based ecosystem will become significantly more efficient and offer far greater utility than doing those same things in the traditional marketplace.
Just to give you a real-world example: clients can already use stablecoins to buy our tokenized money market fund. When they want to redeem, we return the proceeds as stablecoins — so the funds never leave their wallet. They hold the token in their wallet when they buy in, and when they sell, they receive stablecoins directly back into that same wallet.
In the traditional system, this would require multiple steps across intermediaries, and a delay of at least a day — or up to three days if you liquidate on a Friday. On these new rails, it can happen instantaneously.
Another area we’re innovating in is real-time shareholder recordkeeping. Today, we have to wait until the end of the day to reconcile who owns shares, who’s sold, and who should be credited with accrued yield — which is calculated daily but only paid out monthly.
But with our blockchain-based token system, we can calculate and distribute yield on a second-by-second basis, and pay it out every single calendar day through new token issuance — including weekends and holidays. That’s not something today’s financial infrastructure supports. You don’t see anything credited to your bank account on a Saturday or a holiday.
Even in these early examples, we’re already seeing major improvements — and I believe those benefits will only grow as more products, counterparties, and liquidity come onto the chain.
Will:
How do you think about stablecoins in their current form?
I think Genius does a lot to create a legal framework for stablecoin issuance and oversight, but to me, stablecoins have essentially been privately issued liabilities. A user deposits money with a company, and that company mints a token backed by a pool of collateral — typically held in Treasuries or similar low-risk assets.
The issuer stands behind a one-to-one redemption promise, but there’s still very limited — if any — legal precedent for what happens in a worst-case scenario.
Yes, a bank deposit is also a liability of a private institution. But banks are subject to extensive regulation, capital requirements, and, importantly, there’s a federal deposit guarantee. Up to a certain limit, the government steps in and backstops those liabilities.
That kind of protection doesn’t exist with stablecoins. You could argue it’s unnecessary because they’re fully collateralized — but we’re still lacking regulatory clarity and legal precedent.
So I’m curious how you — personally and as a firm — view where we are on the maturity curve of stablecoins. I don’t think any of this is unresolvable, but I also don’t think we can say stablecoins are yet a one-for-one substitute for fiat or bank deposits.
Sandy:
I completely agree — stablecoins are not the same as cash or deposits.
And at this point, the vast majority of stablecoin volume is concentrated in just two issuers. These are relatively new companies. While they’ve done a lot to demonstrate what’s possible in this space, they’ve also raised concerns in the marketplace.
They’ve been innovative, yes, but they’re not yet trusted to the same degree as the banks or credit card companies people have dealt with for decades.
I believe that in the wake of Genius, we’ll see a new wave of regulated stablecoin issuers enter the space. And it’s this next cohort that will likely drive the next phase of growth.
This follows a common pattern — where early market share is gained by startups, but once more trusted, regulated players enter, especially when it comes to cash-related instruments, they start to dominate.
Banks may adopt the stablecoin structure themselves. We’re also going to see the rise of tokenized deposits and central bank digital currencies. It’s not that these are inherently superior — stablecoins are actually a very elegant structure.
I almost think of them as a digital check — a bearer instrument that can be redeemed for the underlying asset.
But the next phase will bring in institutions that can offer greater transparency, broader service bundling, and higher trust — and that’s when we’ll start to see the displacement of some of today’s early leaders.
Will:
Interesting. There’s been a lot of chatter about what happens post-Genius — specifically, that banks are now going to start issuing stablecoins.
I may be naive or just not imaginative enough, but it seems to me like issuing a stablecoin isn’t actually a good business for a bank to be in.
To your point, it cannibalizes their own deposit base — and they’re doing so on a fully reserved basis, which limits their net interest margin. It also restricts what they can do with what would otherwise be deposits they could lend out.
Tokenized deposits are something of a question mark for me — particularly from a retail standpoint. Does it really improve the customer experience compared to traditional bank deposits? I’m not sure it does.
Now, maybe you could make an argument for wholesale tokenized deposits being different — but even there, it seems like a huge amount of industry coordination would be required.
For example, if Bank A issues a tokenized deposit and a client transfers it to Bank B, Bank B likely wouldn’t want to hold Bank A’s liability. So they’d need to settle it or convert it into their own tokenized deposit. That requires a lot of cooperation.
And even if that infrastructure exists — how much efficiency gain does it actually deliver?
You mentioned earlier that we’re likely to see new issuers enter the stablecoin or tokenized cash-equivalent space over time. How do you see that playing out?
Sandy:
I think it’s going to be a defensive play.
In many ways, banks would probably prefer not to do this at all — or to push for alternatives like tokenized deposits or tokenized liabilities — but I don’t think they’ll get that choice.
Either they’ll see cash leaving their ecosystem for stablecoin issuers and not coming back, or they’ll have to issue their own stablecoins so they can at least remain part of the cash flow — and recoup some of the lost net interest through the yield on reserve pools.
So yes, I think stablecoin issuance by banks is going to be defensive in nature.
That said, I’m not convinced every bank will want to issue its own stablecoin. We could see cooperative models, where multiple banks participate in a shared stablecoin — similar to how some of the instant payment networks were built collaboratively, rather than individually. We might see something similar here, at least at first, until banks get a better understanding of the dynamics.
I'm also not too worried about what this shift means for their lending base — provided they’re still able to capture some of the yield from the stablecoin reserve pool.
There’s a growing number of opportunities to deploy stablecoins — including their own issued coins — in new digital lending protocols. I think what we’ll see is a shift in the lending model itself, becoming more decentralized. And I believe banks will be able to adapt quickly to that.
They’ll likely find ways to use their stablecoins or tokenized deposits within those protocols, continuing to participate in credit markets — just through new channels.
So yes, it may represent a structural shift in how lending operates. But I don’t think banks will lose their role altogether. They still have trusted brands, and when it comes to managing money, people will continue to value that trust — especially in times of stress or uncertainty.
Will:
Mm-hmm.
Digital asset custody has been off the table for banks for a number of years — until recently. Now, the door is definitely open, and to me, that seems like the big unlock.
The obvious next step is banks offering their clients digital asset wallets — accounts where banks custody stablecoins on behalf of customers.
Within those wallets, clients would be able to purchase financial instruments, make payments, and interact across stablecoin rails.
I’d also expect that at least the larger banks would be able to negotiate revenue-sharing arrangements with issuers like Circle or Tether, similar to the arrangements we already see with large crypto-native firms.
That, to me, seems like a near-term development that could materialize quite soon.
Sandy:
Absolutely — and not just banks.
I think every financial institution is going to need to offer its clients some version of a wallet-based system.
There will be sub-wallets, linked wallets — and depending on the client’s needs or preferences, where and how they hold their assets could vary significantly, especially across generations.
In the infrastructure we’ve built at Franklin Templeton — the same one we use to run our tokenized funds — we already support sub-custody, where we manage tokens and the associated keys on behalf of clients.
We also allow for self-custody, where clients manage their own keys, and we support third-party custody.
That kind of interoperability across wallet models is what I think will define the next generation of financial infrastructure.
The big benefit is that we move away from today’s account-based system, where reconciling account views across institutions is a challenge.
With wallets, once I have a wallet address, I can share that address with any bank or counterparty. And if I provide the key, they can independently verify that it’s mine and see exactly what’s in it.
That removes the need for institutions to reconcile disparate views of a client’s holdings.
I can hold my wallet at a bank, with a custodian, or myself — it doesn’t matter. As long as I control the keys, I can give permissioned access to whoever needs it. That’s a fundamentally different — and better — system.
Will:
Mm-hmm.
I imagine this is something you’ve thought a lot about — more than just hypothetically.
As one of the leading asset managers, Franklin Templeton already has infrastructure and experience around integrating investment products with payments. I don’t know the specifics of your money market fund offering, but in the past I’ve had accounts that allowed a debit card to be linked to a money market fund, enabling spending directly from that balance.
So there is precedent for blending checking, savings, and payments functionality.
Looking ahead — as we move further into what you might call stablecoin rails or digital asset rails — and explore the possibilities for building financial products and accounts on top of that infrastructure, I’m curious how you’re thinking about what comes next.
You already operate Benji, a tokenized money market fund, and service direct-to-consumer investors through that product. But are there other types of financial products you're considering offering through this infrastructure?
Benji is already deployed as a standalone app — but is that just the beginning?
Sandy:
One hundred percent.
What we’ve done with the Benji Tokenized Money Market Fund is use it as a test case — a proving ground to demonstrate that we can run any type of fund on these new blockchain rails.
We started with a U.S. mutual fund — a 1940 Act fund — which was the original Benji product. Since then, we’ve built out a second version of our transfer agent out of Luxembourg, and launched:
- a Luxembourg-based money market fund
- a private fund version
- and a Singapore Variable Capital Company (VCC) version — which has already been announced.
So, we’ve effectively taken each major type of fund wrapper and rebuilt it as a tokenized instrument that can be issued on blockchain.
We’ve deployed this system across nine public blockchains and one private blockchain, and we've opened wallets for every token holder across all of those chains. That allows us to internalize cross-chain movement for our clients and open up the ecosystem in a much more seamless way.
Because we support wallet-to-wallet or peer-to-peer transfers between participants in our system, we’re already seeing use cases where clients are using Benji like they’d use Venmo — sending money-like tokens to each other in real time.
Money market funds can be fractionalized down to cents — so they’re highly transferable. And this introduces the idea that there’s money, and then there are money-like instruments — and increasingly, these instruments are being used like money.
Another emerging theme we’re hearing more about is tokenized gold. I think we’ll continue to see assets with clear value and store-of-value characteristics become viable payment tools.
In other words, more and more assets — not just fiat currencies or stablecoins — will be used for payments within this ecosystem.
It’s almost like we’re heading toward a high-tech barter society — where goods, not just currency, can be used for settlement.
In a sense, that’s a very old model — but now it's re-emerging in an entirely new way, built on brand-new rails.
Will:
One of the things that’s really impressed me about Franklin Templeton’s work in this space — and what I think sets you apart — comes down to three key factors.
First, just how early you started. While others have launched tokenized private funds, you built a tokenized 1940 Act fund — which is remarkable. When did you start working on Benji?
Sandy:
We actually filed for that fund in 2019.
Will:
Wow.
Secondly, if I’m not mistaken, you’ve built out a sizable in-house engineering team to support this.
While many others have partnered externally to deliver the tech, you’ve made the investment internally — which I think is significant.
Sandy:
Yes, absolutely — 100%.
We’ve always seen this as a technology challenge that we wanted to solve ourselves. From the outset, we believed that if these rails proved as effective as we hoped, they could eventually become the foundation of our own infrastructure as a firm.
So in a way, we’ve been running a multi-year proof of concept — not just for one product, but for the platform we believe will support our entire asset management business over the next decade.
That means building the technology ourselves, developing in-house talent that understands digital-native models, and getting our operations and network teams running verification nodes across 11 different blockchain networks.
All of that has given us real, hands-on experience — which we believe will be essential to operating as a modern asset manager.
We’re starting to see more firms move in this direction, but I think we’re further along in the journey. That’s allowed us to accumulate valuable insights — and, hopefully, a strategic edge — as this ecosystem matures.
I believe Franklin Templeton will be one of the top firms offering products on these tokenized, wallet-based rails — and just as importantly, we’ll be one of the firms actively shaping the future of how the financial experience is delivered to investors.
Will:
Absolutely. And the third thing — which ties into everything we’ve been discussing — is that, alongside BlackRock, Franklin Templeton is one of the very few firms where this vision seems to be driven from the top.
I wonder if you could talk more about that. What impact does that kind of leadership have internally?
Sandy:
Yes — and it's a critical piece of the story.
Franklin Templeton is a public company, but in many ways, we operate more like a family office. The firm was originally established by the Johnson family, and Jenny Johnson, our current CEO, is the third generation of her family to lead the business.
That background creates a very different mindset at the leadership level. Jenny isn’t just thinking about our next quarter’s earnings, or whether we’re making the right moves to grow our asset management business in the short term.
She’s also deeply focused on whether we’re setting the firm up to be even more successful for the next generation.
In that sense, we’re much more like a sovereign wealth fund — or a multi-generational family office — where we operate with a long-term time horizon and are willing to make investments that many firms simply can’t justify under quarterly pressures.
As I mentioned earlier, we started this journey in 2019. That was six years ago. The space is now starting to gain traction, and we’re finally seeing asset growth — but that’s only possible because Jenny had the vision and commitment to invest long before the market caught up.
And it hasn’t always been easy. There have been plenty of moments when people asked, “Why are you investing in this now? Why not wait until the market is more developed?”
But Jenny is a true visionary. She also ran operations and technology for the firm earlier in her career, so she understands — deeply — just how transformational this infrastructure can be.
Having executive sponsorship is important. But having long-term executive sponsorship — from someone who sees beyond cycles and is willing to invest in transformation — that’s what makes all the difference.
Too often, firms get caught up in short-term thinking. And when that happens, they lose sight of the fact that the most meaningful shifts — the ones that truly redefine industries — require sustained commitment over many years before the payoff becomes visible.
Will:
Circling back to the beginning of the conversation and the topic of stablecoins, I wonder if you’d be open to expanding on the idea of a spectrum of cash and cash equivalents.
On one end, you have stablecoins, and on the other, you have things like Treasuries, T-bills, and products that invest in those assets — with decades of regulatory precedent and very high-grade credit ratings.
Money market funds fall into that latter category — and of course, you manage and issue one on-chain.
How do you think about money market fund tokens versus stablecoins? And how do their roles and use cases differ in a wallet-based financial system?
Sandy:
I think of it quite simply.
In today’s system, you have a checking account — that’s cash you use for spending. And then you have a savings account — also cash, but it earns yield, so you might not spend it as quickly.
That’s how I view the relationship between stablecoins and money market funds.
Stablecoins are for immediate spending — they’re the checking account. Money market fund tokens are cash earning something — the savings account.
At Franklin Templeton, we strongly believe there’s going to be a constant rotation of cash between those two instruments.
And we’re already seeing a version of this today: major trading firms sweep excess cash into money market funds at the end of the day to capture overnight yield.
The difference is, in a wallet-based ecosystem, that cash rotation will happen at blockchain speed.
We’ll see real-time flows back and forth — from stablecoins into tokenized money market funds and back — depending on the user’s need for liquidity or yield.
And that’s why, coming back to the Genius Act, it’s so important to close the loophole around stablecoins paying rewards. That kind of yield blurs the lines too much between what should be used for payments and what should be treated as an investment product.
If stablecoins start paying yield, then I’d argue that tokenized money market funds become the superior form of payment.
Why? Because they already come with decades of regulatory oversight, they’re backed by the SEC, and they’ve gone through a much more rigorous set of checks and balances.
So if a stablecoin behaves like a money market fund — but without the same regulatory rigor — that’s problematic. It weakens the stablecoin case, and it puts the entire system at risk of blurred boundaries.
To me, it’s important to keep the two products distinct, because they serve different use cases. Stablecoins are for liquidity and payments. Money market fund tokens are for yield and short-term savings.
Will:
So, maybe to start to wrap up — you mentioned that you began the Benji journey back in 2019. We’re six years in now, but you’ve also made it clear that Franklin Templeton thinks in decades — or even generations.
Where are you in your tokenization journey as a firm? And what’s next?
Sandy:
What’s next is actually what I’m most excited about.
We’ve now identified the key use cases for these tokenized liquidity products — whether that’s for collateral, liquidity, reserve pools, or lending. We’re seeing tokenized money market funds begin to emerge as core tools in the wallet-based ecosystem. That part of our business is really about to scale in a major way.
At the same time, we’ve already proven that we can issue a 1940 Act fund, a UCITS fund, and a private fund — all in tokenized form. That opens the door for us to begin migrating our broader investment expertise, beyond just money market products, onto blockchain rails.
And that’s where things get really interesting.
We now have the opportunity to reimagine what an investment building block looks like, if we were designing it from scratch — with blockchain infrastructure in mind.
There’s growing enthusiasm for tokenized equities, tokenized bonds, and tokenized ETFs. All of that is exciting. But we’re also asking deeper questions:
- How do we want to build portfolios in the future?
- How do we align portfolios more directly with individual investors?
In traditional wealth management, we’ve seen a big move toward separately managed accounts and direct indexing.
Tokenization makes both of those easier to deliver.
Imagine a world where every equity in the S&P 500 is tokenized — and then bundled into a tokenized S&P 500 index fund.
You could hold the single index token — or, if you prefer, you could unwrap it into 500 individual tokenized equities. Once you unlock that level of composability and transferability, it opens up entirely new possibilities for portfolio construction.
So, over the next year, we’re incredibly excited about what we’re going to be launching.
We think it’s going to open people’s minds to what’s possible — and shift thinking across the industry. Because when you introduce new rails, you create new opportunities to improve how we’ve always done things.
Will:
It’s incredibly powerful.
I think a lot of the external focus has been on getting assets on-chain — converting them into tokens. When Robinhood announces tokenized equities or tokenized private shares, it gets mainstream attention — and rightly so. It’s exciting.
Many have pointed out that the real innovation will come when securities are natively issued as tokens, rather than wrapped. That’s when the full functionality really begins to show.
But even that is just one side of it.
There’s tremendous utility on the tokenization side — things we haven’t even touched on yet, like the ability to post tokenized assets as collateral, or to build programmable logic around ownership and transfer, which just isn’t possible with traditional financial instruments.
On the operational side, though, it gets equally interesting.
You mentioned earlier that Franklin Templeton built its own digital transfer agent. That’s a big deal.
One of the realities of asset management over the last few decades is that we’ve seen extensive fee compression on the product side — firms like Vanguard famously launched ETFs with five basis points in fees.
But I don’t get the sense that we’ve seen the same level of cost reduction or efficiency on the operational side.
Margins in the investment management business have been under pressure.
How are you thinking about this internally? And is that part of the reason you’ve invested so heavily in building out your own infrastructure?
Sandy:
Absolutely — and in fact, our original use case was entirely about operational efficiency.
That’s where it started for us. We asked: how can we use this infrastructure to streamline our internal processes? And it was through that lens that we realized just how powerful these rails actually are.
That’s when we expanded our focus — from internal efficiency to investment opportunity.
But at the core, this still comes back to automation and programmability. One of the biggest enhancements we’re going to see is the ability to embed smart contracts directly into financial instruments.
That means certain contractual clauses can become self-executing — eliminating manual steps and reducing time to settlement.
As you noted earlier, settlement won’t be T+1 or T+2 anymore — it’ll be T+2 seconds. That shift requires a level of automation that only blockchain and smart contracts can deliver.
To keep up with this pace, we’ll also need AI agents overseeing contract execution — identifying edge cases and activating circuit breakers if something unexpected arises.
We’re talking about a future where much of the financial system is orchestrated autonomously — with less human intervention, fewer reconciliations, and significantly lower operational risk.
When you remove those delays, you also reduce the need for capital buffers. There’s no need to post as much capital to manage risk during settlement windows. And you need fewer people fixing mismatches, because there are fewer mismatches in the first place.
All of that means higher volumes, greater velocity, and a system that’s no longer session-based, but running 24/7.
It’s a whole new marketplace — one that’s faster, more efficient, and less expensive to operate.
But getting from here to that vision — what sounds almost like nirvana — will take a lot of reengineering and a lot of creativity.
And that’s exactly why starting early has been so important for us. We’ve been forced to wrestle with real-world implications:
- Can we actually do this?
- What would it require?
- What are the downstream effects?
We’re constantly asking ourselves:
How do we avoid creating two parallel systems — one old, one new — and instead create a clear roadmap that transitions our business to this next-generation infrastructure?
It’s going to be a lot of work over the next few years — but it’s an exciting journey. And I’m confident the outcomes will be well worth the investment.
Will:
Totally. Sandy, this has been an incredible conversation. I really appreciate your time and insights — it’s always a pleasure to chat with you.
Sandy:
Oh, thank you. It’s been really fun. And as always, I love chatting with you.
Will:
Sandy Kaul, thank you very much for joining us today.
Sandy:
Thank you.