Franklin Templeton says Wall Street fears blockchain because it threatens its profits

The asset management industry is undergoing a significant shift towards on-chain solutions, but this transition is uncovering a fundamental conflict around traditional corporate revenue models.

During a panel discussion at the Proof of Talk summit in Paris, Jenny Johnson, the CEO of Franklin Templeton, a massive $1.74 trillion asset manager, openly acknowledged the industry’s reluctance to embrace decentralized networks. Johnson highlighted that major financial institutions are hesitant to adopt public blockchain technology because it directly challenges their current profit structures.

“Blockchain technology poses a significant threat to many of the business models that currently exist in traditional finance,” Johnson emphasized. “The hesitation you see is primarily driven by this threat to the established revenue streams, particularly for those acting as intermediaries in transactions.”

She further elaborated that with the ability of blockchain to facilitate instant settlement through smart contracts, large banks and financial institutions may no longer be able to levy transaction fees as intermediaries.

While native crypto networks are designed around open architecture, traditional financial systems are gradually transitioning to public blockchains due to the substantial efficiency gains in transactions. Johnson cited Franklin Templeton’s experience with running its tokenized money market fund, Benji, on public networks to illustrate the cost savings.

“The cost savings were significant,” Johnson revealed, providing a breakdown of the internal data. “We were spending around $1.30 per transaction for 50,000 transactions on the old system. In contrast, running on the Stellar blockchain cost us only about $1.13 per transaction.”

The mention of Benji coincided with the announcement of Franklin Templeton’s expansion of its digital asset strategy through a new partnership with MoonPay. This collaboration will enable institutional investors to seamlessly transition between stablecoins and the asset manager’s tokenized money market fund using an on-chain workflow.

“In the realm of everyday transactions, whether by individuals, small businesses, or large enterprises, there is a desire for a trusted intermediary,” Johnson remarked. “People prefer to delegate the responsibility of safeguarding their assets to a third party rather than keeping them in personal wallets or safes at home. This is why custodians and banks still hold relevance in our financial ecosystem.”

The influx of institutional capital into digital assets will hinge on the establishment of standardized, cost-effective compliance channels for traditional investment funds. While bitcoin offers users the ability to maintain financial privacy without the need for institutional involvement, Johnson asserted that mainstream investors will continue to seek out regulated custody solutions.

The evolving landscape of asset management underscores the need for industry players to adapt to the changing dynamics of blockchain technology. As financial institutions navigate this transformation, the integration of on-chain solutions will play a crucial role in reshaping the future of asset management.