Investors who want to mix conventional stocks and cryptocurrencies now have an automobile to monitor. Franklin Templeton, a global asset manager, has actually requested for registration of two new exchange-traded funds (ETFs) which will convert stock dividends into digital currency. These innovative products could launch as early as Sept. 

These two funds proposed are Franklin US Equity Bitcoin DRIP Index ETF and Franklin US Innovation Bitcoin DRIP Index ETF. These funds automatically reinvest stock dividends into Bitcoin exposure rather than cashing out and paying them to investors. The strategy uses Bitcoin exchange-traded products, options, and futures to build the crypto position.

How the Dividend Reinvestment Works

To manage risk, both ETFs will be tilted toward custom VettaFi indexes. Starting money allocations begin at a heavy base of traditional equities, 95% U.S. big cap stock, 5% Bitcoin.

The funds have rebalancing restrictions safeguarding investors from crypto market volatility:

• The portfolio manager will re-balance assets quarterly.
• The BTC portion of the funds will be reduced to 4.5% if it exceeds the 5% limit and the funds will rebalance on a quarterly basis.
• Between quarterly resets, the Bitcoin exposure has a hard cap of 20%.

The equity index underlying the index includes market-leading securities to the number of around 498. Their businesses have a market capitalization of $7.5 billion to $4.9 trillion.

A Growing Digital Asset Footprint

This dual filing marks a major step in Franklin Templeton’s aggressive crypto expansion. The firm runs the spot Bitcoin ETF, EZBC, which has $358.9 million in net assets and $329.6 million in total net inflows.

Franklin Templeton also is investing a lot in crypto infrastructure outside its ETFs. The firm teamed up with Kraken parent company Payward to tokenize traditional investments. In addition, the manager has also connected its BENJI tokenized money market fund with MoonPay Trade for institutional crypto users.