For decades, index funds have used dividends to buy more stock. Franklin Templeton wants to use them to buy Bitcoin (BTC) instead.
The asset manager has filed for two Nasdaq-listed funds, each starting with 95% stocks and 5% Bitcoin exposure. Neither has launched yet.
Why does this matter for Bitcoin? Index funds invest in baskets of major company stocks. When those companies pay dividends, or cash rewards to shareholders, the money usually goes back into buying more stocks. Franklin Templeton wants to use that money to buy Bitcoin exposure instead, creating a regular source of BTC demand.
How Would a Stock Dividend Become Bitcoin?
One fund holds the 500 largest US companies. The other holds the 100 biggest Nasdaq-listed firms, minus finance companies.
Each starts with 95% in stocks and 5% in Bitcoin. Then the dividends start flowing.
“All regular and special dividends are reinvested into Bitcoin at the market open on the day following the dividend ex-date, which increases Bitcoin exposure over time,” reads an excerpt in the prospectus.
The fees are low. The larger fund charges 0.09% a year, or $9 on every $10,000 in year one.
The Fund Will Automatically Sell Bitcoin When Price Rallies
Here is the twist. Every quarter, any Bitcoin share above 5% gets cut back to 4.5%. If it passes 20% between reviews, it is reset to 4.5% within two business days.
So, a Bitcoin rally triggers selling. A crash does the opposite, leaving fresh dividends to buy at lower prices.
The funds won’t hold coins directly. They will buy Bitcoin funds, including Franklin-affiliated ones, alongside futures and options. Franklin says it may waive fees on its own products, but it can end that waiver at any time.
Franklin’s own prospectus calls Bitcoin highly speculative and prone to big price swings.
The wider debate is loud. Himalaya Capital founder Li Lu called crypto fundamentally bogus last week. BlackRock, which manages more money than any rival, recommends a 1-2% Bitcoin position.
Franklin’s design sits closer to BlackRock’s camp. Its Bitcoin slice starts at 5% and gets trimmed once it grows.
The real test comes when trading begins on Nasdaq, where Franklin has registered the shares.
