Franklin Templeton disclosed that it has submitted an application to the U.S. Securities and Exchange Commission for a new ETF that would convert dividends from its stock holdings into Bitcoin exposure, rather than distributing them directly to investors. According to the application, the product would combine a large-cap U.S. stock allocation with systemic Bitcoin accumulation.
The tracking index primarily focuses on US stocks.
The proposed product is named Franklin US Equity Bitcoin DRIP Index ETF, aiming to track the VettaFi US Large-Cap 500 Bitcoin DRIP Index. Unlike spot Bitcoin ETFs that directly track BTC prices, this fund's main holdings will remain large-cap US stocks.
According to the document, the initial allocation of the relevant index is 95% US large-cap stocks and 5% Bitcoin. The product does not reinvest stock dividends into stocks, nor does it distribute them in cash; instead, it redirects the funds corresponding to the dividends to Bitcoin exposure.
Transferred to Bitcoin after dividend ex-dividend
The application documents show that regular and special dividends paid by the index constituent stocks will be systematically converted into Bitcoin allocations the day after the ex-dividend date. This will cause the fund's Bitcoin exposure to gradually increase as dividends accumulate.
- The initial allocation is 95% US large-cap stocks and 5% Bitcoin.
- A periodic rebalancing is triggered when Bitcoin exposure exceeds 5%.
- The overall Bitcoin allocation limit is set at 20%.
An opening can be obtained through a variety of tools.
The documents show that the fund will not only allocate to Bitcoin through a single path, but will also use Bitcoin exchange-traded products, futures, options, and some Bitcoin-backed depositary receipts to establish exposure.
The application documents also mention that, for tax purposes, some of the Bitcoin-related investments can be held through a Cayman Islands subsidiary.
This application also reflects that asset management institutions are continuing to expand their Bitcoin-related products. Since the US approved spot Bitcoin ETFs, issuers have moved beyond simple buy-and-hold structures and begun to experiment with covered call, yield-generating, and hybrid asset allocation products.
Additional information:If approved, this ETF will be based on a portfolio of large-cap U.S. stocks and will accumulate Bitcoin exposure through dividends rather than relying primarily on direct Bitcoin purchases to build its position.
