Franklin Templeton Clears Final Hurdle For ETFs That Turn Stock Dividends Into Bitcoin
Franklin Templeton has cleared the final regulatory hurdle for two exchange-traded funds that convert stock dividends into bitcoin, with trading set to begin October 27 on Nasdaq.
On October 22, Franklin Templeton filed a Form 8-A with the Securities and Exchange Commission to register shares of the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF for trading on Nasdaq. The prospectus filed the same day lists an effective date of October 27. The filings for both funds initially arrived in June without tickers or fees, with details now completed after four months.
How the funds work
The Equity fund, ticker FBEQ, tracks the VettaFi US Large-Cap 500 Bitcoin DRIP Index, which holds the 500 largest U.S. companies by market capitalization. As of September 30, it held 499 stocks ranging from $10.2 billion to $5.5 trillion in size, with a concentration in information technology. At inception, the index allocates 95% to those stocks and 5% to bitcoin.
Each dividend the companies pay, regular or special, is reinvested into bitcoin at the market open on the day after the ex-date. Unlike traditional dividend reinvestment plans that buy more shares of the company that paid the dividend, Franklin's version routes that cash into bitcoin. For a holder, the dividend stream from the largest companies in America becomes a recurring bitcoin purchase, with no exchange account, no wallet and no custody decisions.
The bitcoin position has limits. At each quarterly rebalance, an allocation above 5% is trimmed to 4.5%. If bitcoin exceeds 20% of the index between rebalances, it is cut back to 4.5% within two business days, and the proceeds return to stocks. The result is a stock fund with a bitcoin sleeve, not a bitcoin fund. FBEQ carries a 0.09% expense ratio with no 12b-1 fee.
A deeper bet on bitcoin
Franklin Templeton filed for a spot bitcoin ETF in September 2023 and launched it as EZBC in January 2024. In April, the firm acquired 250 Digital and formed Franklin Crypto, an institutional digital asset division. Franklin Templeton CEO Jenny Johnson has argued that blockchains threaten Wall Street's fee structure more than its technology.
The DRIP funds extend that strategy to investors who may never buy bitcoin on their own. A retiree holding an S&P 500-style fund in a brokerage account can, through FBEQ, let dividends from the companies she already owns build a bitcoin position over years. The prospectus warns that investors can lose money, and that bitcoin's price swings may affect the fund's net asset value.
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