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$1.3T Asset Manager Exploring Use Cases for NFTs

source-logo  blockworks.co 07 December 2022 17:46, UTC

One of the world’s largest asset managers is exploring the use cases for NFTs despite a turbulent crypto market environment, noting such tokens’ relevance beyond just digital art.

The company minted its first NFTs — issuing them to attendees of its first Innovation Forum held in September to offer clients a way to explore the digital assets ecosystem — and now seeks to move further into the space.

“We see NFTs in their literal sense and more generally than just for their application with artwork or collectibles,” Mike Muir, Franklin Templeton’s head of digital assets technology, told Blockworks. “[An NFT] is an applicable construct for any unique asset for which only one exists.”

For example, Muir added, loans and property titles are unique assets that are not fungible.

Franklin Templeton allowed attendees of its Innovation Forum the ability to download the NFT through the firm’s Benji Investments app. It acted as “a badge” and was non-transferrable, the company said, and clients could use the token to access research from the Franklin Templeton digital assets team.

US clients across asset management and financial services have shown interest in interacting with digital assets such as NFTs, according to the company.

“Firsthand practical experiences like this create understanding and foster contemplation and thought as to what else may be possible,” Muir said. “In the long term, we are considering generalizing our issuance of NFTs for a variety of purposes and are devoted to uncovering new applications for these assets.”

Dmitriy Berenzon, a research partner at early-stage venture fund 1kx, said that exploring the issuance of on-chain assets is the right way to go for institutions. He added that Franklin Templeton is correctly using this tool to drive more engagement with their community.

“It is not about permissioned blockchains that try to improve the efficiency of walled gardens, but rather about permissionless, crypto networks that drive human coordination at scale through the use of tokens,” Berenzon told Blockworks.

For other large financial services companies, NFTs can offer additional avenues for interacting with on-chain assets and liquidity, such as liquidity pools gated by know-your-customer (KYC) requirements, the 1kx research partner added.

“That said, they likely need more regulatory clarity prior to committing any significant amount of balance sheet,” Berenzon said.

An evolution for fund managers

Franklin Templeton, which had roughly $1.3 trillion in assets under management as of Oct. 31, has been moving deeper into the crypto space in recent months.

The company launched the Franklin OnChain U.S. Government Money Fund — a mutual fund using blockchain to process transactions and record share ownership — in April 2021.

The fund manager unveiled its first crypto-focused separately managed accounts (SMAs) for investment professionals in September.

Roger Bayston, the company’s segment lead, called digital assets “frontier risk alternatives” in an October interview with Blockworks. He added that Franklin Templeton was looking into bringing additional digital asset investment strategies to market.

The fund giant’s move into NFTs comes after asset manager VanEck launched an NFT collection in May designed to ​​”build an active community of crypto-focused investors,” the firm said.

Though ProChain Capital President David Tawil said at the time VanEck’s launch was “a bit of a gimmicky way” to draw people into NFTs, he added that the effort could bridge gaps between the collectibles aspect of NFTs and their broader use cases.

VanEck’s NFT community started off with nearly 50,000 sign-ups, and the firm connected its members at in-person and virtual events, according to Matthew Bartlett, who leads VanEck’s NFT community and Web3 efforts.

Bartlett told Blockworks that the firm is encouraged to see another global asset manager using NFTs to foster client engagement and community building.

“We strongly believe that NFTs and related blockchain applications will become integral parts of the client engagement experience across a range of industries, from finance to social media to consumer technology,” he said.