Franklin Templeton launches ETFs converting dividends into Bitcoin: a new era of yield
Asset manager Franklin Templeton has filed an application to launch two exchange-traded funds (ETFs) that will automatically reinvest stock dividends into Bitcoin (BTC). According to the documents, the funds could begin operations as early as September 1, 2026.
The funds in question are the Franklin US Equity Bitcoin DRIP Index ETF and the Franklin US Innovation Bitcoin DRIP Index ETF. The acronym DRIP refers to dividend reinvestment plans, which have long been used to increase equity stakes, but here the mechanism is reconfigured to accumulate Bitcoin.
How the new funds work
The funds will track the VettaFi US Large-Cap 500 Bitcoin DRIP Index and a related innovation variant. Under the plan, dividends from stocks within the fund will be systematically invested not back into the securities, but into BTC. The funds will gain exposure to Bitcoin through exchange-traded products on the leading cryptocurrency, futures, options, and other instruments.
At launch, the index allocates 95% of assets to large-cap U.S. stocks and 5% to Bitcoin. During quarterly rebalancing, any BTC share exceeding 5% will be reduced to 4.5%, with an overall cap of 20% in effect between rebalancing periods.
As of April 30, the underlying stock index included approximately 498 securities with market capitalizations ranging from $7.5 billion to $4.9 trillion. Thus, the funds provide investors with a broad basket of U.S. stocks, while building an increasing Bitcoin allocation through the dividend stream.
Part of a broader crypto strategy
The filing is the latest step in Franklin Templeton's development of its crypto initiative. Its spot Bitcoin ETF (EZBC) holds $358.9 million in net assets and has attracted $329.6 million in total cumulative inflows.
In May, Franklin Templeton partnered with Payward, the parent company of crypto exchange Kraken, to explore new ways of tokenizing traditional investment products. Tokenization involves issuing digital representations of real-world assets on the blockchain.
Earlier this month, the company announced the integration of its tokenized money market fund BENJI and other products into the MoonPay Trade service. This will allow institutional users to exchange USDC and USDT stablecoins for the Franklin tokenized fund through MoonPay's infrastructure.
Analytical commentary: This move by Franklin Templeton is a vivid example of how traditional finance is adapting to the new reality. The mechanism of automatically converting dividends into Bitcoin not only simplifies entry into cryptocurrency for conservative investors but also creates a unique tool for diversification. Essentially, this is the first step toward hybrid products where classic stock returns are transformed into the growth potential of the leading cryptocurrency. I believe we will see a wave of similar offerings from other asset managers in the coming years.