No need to sell stocks to gradually increase Bitcoin exposure. Franklin Templeton is trying to combine the U.S. stock dividend reinvestment mechanism with Bitcoin allocation.
On October 27, Franklin Templeton's related registration documents for two Bitcoin dividend reinvestment ETFs became effective, bringing the products closer to formal trading. However, as of now, the funds have not yet started trading, and the specific listing date remains to be confirmed.
The two products are the Franklin US Equity Bitcoin DRIP Index ETF (FBEQ) and the Franklin US Innovation Bitcoin DRIP Index ETF (FIBT). Their design concept is to hold a basket of U.S. stocks and use the regular and special dividends from these stocks to increase Bitcoin exposure. 
95% stocks and 5% Bitcoin, changing the flow of dividends
Unlike traditional dividend reinvestment plans, these two funds do not reinvest dividends back into the original stocks; instead, they allocate dividends to Bitcoin-related assets.
Among them, FBEQ tracks a large-cap U.S. stock index, with an initial allocation of 95% stocks and 5% Bitcoin. FIBT tracks an index that leans toward innovative companies. As of the end of September, this index includes 100 securities and focuses on the information technology sector.
The fund does not necessarily hold spot Bitcoin directly but can gain exposure through Bitcoin traded products, futures, options, and other tools.
The dividend reinvestment mechanism will also affect the fund's asset composition. As dividends are continually reinvested into Bitcoin, the related exposure may gradually increase. To control the ratio, the index rules stipulate that during quarterly rebalancing, if the Bitcoin weight exceeds 5%, it will be adjusted down to 4.5%; if the weight exceeds 20% between two rebalancing periods, corresponding adjustments will also be triggered.
This is not an ordinary Bitcoin ETF
The distinction of these two products from traditional spot Bitcoin ETFs lies in their combined structure that includes stock exposure along with a dividend-driven Bitcoin allocation mechanism.
The annual operating expense for FBEQ is 0.09%, while FIBT is 0.19%. The former is tilted towards the large-cap stock market, while the latter is more concentrated on innovative companies. Investors need to consider both stock market volatility and Bitcoin price fluctuations, as well as the risks involved in obtaining exposure through related tools.
This type of product does not necessarily mean that dividends can consistently cover the Bitcoin allocation needs. The amount of dividends depends on the dividend situation of the underlying stocks, while Bitcoin prices may experience significant fluctuations.
Traditional asset management is redesigning the entry to crypto assets
In the past, investors typically needed to actively purchase Bitcoin or related ETFs to establish exposure to crypto assets. This product design embeds Bitcoin allocation within the stock dividend reinvestment process, attempting to create a more direct link between traditional stock portfolios and crypto assets.
For asset management institutions, this is also an exploration of product structure: not solely selling Bitcoin investment tools but integrating a regulated crypto asset allocation within traditional stock strategies.
What truly deserves attention is not just when the two ETFs will begin trading, but whether the model of automatically allocating Bitcoin can attract long-term stock investors and how it will impact the way crypto assets are allocated within traditional portfolios.
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