Franklin Templeton launches two ETFs that direct stock dividends into bitcoin

Franklin Templeton launched two Bitcoin DRIP ETFs that began trading today on Nasdaq. The funds are the Franklin U.S. Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin U.S. Innovation Bitcoin DRIP Index ETF (FIBT). Both funds direct dividends from large U.S. companies into bitcoin exposure.

The launch concludes the final regulatory step following Franklin's October 22 submission of registration papers to the Securities and Exchange Commission. Both funds' initial filings appeared in June without ticker symbols or fee information. Those details became available four months later.

FBEQ follows the VettaFi U.S. Large-Cap 500 Bitcoin DRIP Index. The index selects the 500 largest U.S. companies by market capitalization and weights the holdings using float-adjusted market capitalization. The index contained 499 stocks as of September 30, with company market capitalizations ranging from $10.2 billion to $5.5 trillion. Information technology represented the largest sector concentration.

The index begins with a 95% allocation to stocks and a 5% allocation to BTC. The index reinvests every regular and special dividend in BTC when markets open the day after the ex-dividend date. Each dividend payment increases the portfolio's BTC share.

A conventional dividend reinvestment plan, or DRIP, purchases additional shares in the company that distributes the dividend. Franklin's approach instead uses the dividend cash to acquire BTC exposure. Fund holders receive recurring BTC exposure from large-company dividends without needing an exchange account, a wallet or custody decisions. The product remains a stock fund with a bitcoin allocation rather than a bitcoin fund.

The index reduces any BTC allocation above 5% to 4.5% at each quarterly rebalance. The index also reduces BTC to 4.5% within two business days if the allocation exceeds 20% between rebalances, returning the proceeds to stocks.

FBEQ does not own BTC on-chain. FBEQ can obtain exposure through bitcoin exchange-traded products, including Franklin's spot fund, bitcoin futures and options, or depositary receipts. Some exposure may be obtained through a Cayman Islands subsidiary. FBEQ has an expense ratio of 0.09% and imposes no 12b-1 fee. Franklin Advisory Services manages FBEQ, and Franklin Templeton Institutional serves as sub-advisor.

Dina Ting, Franklin Templeton's SVP and Head of Index Investments, said bitcoin has become a more mature investment asset. Ting cited deeper market infrastructure, wider adoption and greater understanding of bitcoin's potential portfolio role. Ting said systematic exposure offers one approach to bitcoin's next adoption stage. Jeff Masom, Head of U.S. Distribution and Global Wealth Management Private Markets, described the funds as a new approach to combining U.S. equities with bitcoin through a distinctive index methodology.