Franklin Templeton Advocates for Blockchain Modernization in US$18 Trillion Retirement Market

US retirement system at inflection point

The executives interviewed, who are responsible for roughly US$18 trillion in assets, described legacy infrastructure as fragmented, inefficient and ill-suited to modern employment patterns and participant expectations.

“We expected (a) debate about the pace of change or which innovations to prioritize. Instead, we heard near-universal agreement that … incremental improvements won’t be enough,’ he continued.

“One participant told us the legacy infrastructure needs to be burned down and built up from scratch. When industry leaders … are that candid about structural deficiencies, it signals we’ve reached a genuine inflection point.”

Crossley explained that there are three forces driving urgency:

• Traditional safety nets are eroding as Social Security faces funding pressure and defined benefit pensions fall. The expert told INN that defined benefit pensions have shrunk from 68 percent of retirement assets in the mid-1970s to around 28 percent today.

• Job tenure has shortened dramatically, with Gen Z averaging less than three years per role versus nearly a decade for older cohorts, breaking systems built around long-term work at a single entity.

• Neobrokers and fintech platforms are increasing the competitive pressure on established companies, attracting younger investors and entering the retirement product market.

How blockchain solves for operational efficiency

While blockchain adoption in retail investment remains gradual, enterprise-level integrations have advanced steadily in recent years. Franklin Templeton itself has issued tokenized money market funds and piloted on-chain share registries.

“Intraday yield enables proportional calculation and distribution of yield, down to the second, when a tokenized security is transferred from one party to another — only made possible by blockchain innovation.”

The firm’s latest research suggests that the same efficiencies could underpin large-scale retirement solutions.

“The core problem in the industry is fragmentation,” Crossley said.

“Retirement data sits in silos across record keepers, plan sponsors, asset managers and benefits administrators, all running separate ledgers that require constant reconciliation,’ he continued, noting that blockchain provides a solution by creating a single shared record that every authorized participant can access simultaneously.

“Beyond that, tokenization allows us to embed rules directly into assets,” Crossley added. “A participant’s 401(k) contribution, their benefits elections (and) their employer match formula can all become programmable contracts that execute automatically. That’s not something a conventional database upgrade can replicate.”

Crossley pointed out that the bulk of retirement administration remains mired in costly, duplicative processes that fail to add value, with record keepers spending about US$12 billion a year servicing plans.

“Blockchain collapses that into a single shared record. When a contribution post or a benefits claim (is processed), every authorized party sees identical data simultaneously,’ he emphasized.

“Smart contracts take it further by automating routine administration. A participant’s contribution rate, investment election and match formula can be encoded into a self-executing contract. The blockchain monitors incoming payroll data and triggers the appropriate actions without manual intervention.”

From account to wallet

As regulatory frameworks mature and data security protocols strengthen, institutional players appear more willing to explore blockchain-based modernization at a broader scale.

If Franklin Templeton’s vision takes hold, the shift from “account to wallet” could mark one of the biggest operational revolutions in retirement management since the 401(k) was introduced nearly half a century ago.

“A wallet-based model consolidates that view. Your retirement contributions, benefits elections and employer match terms become tokens held in a single digital wallet that you control and carry with you across jobs.’

He noted that custodians and asset managers would have to rethink delivery.

‘Instead of being product manufacturers pushing funds into accounts, they become service providers operating within a networked ecosystem where the participant’s wallet is the central hub,’ Crossley said.

Barriers, challenges and regulatory engagement

Despite the promise, Crossley acknowledged that implementation roadblocks still lay ahead.

“Culture may be the steepest climb. The retirement industry has been conditioned by litigation risk to avoid anything nonstandard. Fiduciaries default to the cheapest, most common options because doing something different invites lawsuits. That mindset has to shift before any technology gains traction,’ he said.

“On the technical side, many record keepers still operate on mainframe systems built decades ago. Extracting and standardizing that data for migration is a massive undertaking,’ Crossley continued. In his view, regulatory clarity would be helpful in speeding up adoption, but internal barriers are hindering established franchies.

Franklin Templeton actively engages with regulators worldwide through sandboxes, hearings and white papers to align blockchain innovations with fiduciary standards while fostering investor protection and market growth.

“Our goal is to help build a regulatory environment where new technologies can thrive safely and transparently, unlocking the benefits of blockchain for institutions and individuals alike,’ he said.

‘By working together, we’re not just advancing our own capabilities; we’re helping to set the standard for a more open, resilient and trustworthy financial ecosystem,’ Crossley added. “We believe that the best regulatory frameworks don’t just safeguard investors; they also create the conditions for growth, experimentation and broader participation.”

The future of retirement systems

Crossley envisions a future where tokenized retirement systems operate seamlessly behind the scenes.

“Imagine a system where your retirement plan follows you across every job without paperwork, where your benefits selections automatically adjust when your circumstances change and where an AI-powered assistant actively optimizes your contributions, benefits usage and purchasing power in real time,’ he said.

“Tokenization makes that possible because it transforms static account records into programmable assets. Your 401(k) allocation, your HSA and your employer match formula all become smart contracts that execute automatically based on your preferences and life events. The end state is a retirement system that works continuously in the background rather than something you revisit once a year during open enrollment.”

Franklin Templeton sees gradual progress leading to meaningful adoption within three to five years.

He also noted that some forward-leaning providers are already testing wallet-based delivery for select participant groups. For example, Fidelity Investments offers Bitcoin exposure in 401(k)s via its digital assets account with up to 20 percent allocation and risk controls, while JPMorgan Chase’s (NYSE:JPM) Kinexys supports tokenized fund shares for automated rebalancing and collateral on permissioned networks. US provider ForUsAll enables up to 5 percent crypto self-directed windows via Coinbase Institutional in its Alt401(k) plans for small businesses.

“The question isn’t whether this shift happens,” said Crossley. ‘But whether incumbent players lead it or find themselves responding to competitors who moved first.”