The project does not involve real customers or money and does not mean the Bank of England has decided to issue a digital pound.
Bank of England Expands Digital Pound Testing
The Bank of England's latest Digital Pound Lab phase will explore how different forms of digital money can interact within a single financial transaction.
The central bank has been researching central bank digital currency technology and distributed-ledger infrastructure since 2024.
Through the latest phase, the BOE wants to determine whether public stablecoin infrastructure and central bank money can coexist rather than requiring businesses to rely on a single payment system.
The Bank of England's Digital Pound Lab provides details about the central bank's ongoing experimentation with digital-money infrastructure.
Stablecoins and Digital Pound Could Support Trade Finance
One of the main areas being tested is cross-border trade finance.
International trade can involve lengthy verification procedures, credit assessments and payment settlement processes. These delays can be particularly challenging for small and medium-sized businesses that depend on working capital.
The latest experiment aims to determine whether digital currencies can make those processes faster and more efficient.
Under one proposed transaction structure, an exporter could receive payment through stablecoin infrastructure while a UK importer ultimately settles the transaction using a potential digital pound.
The model could demonstrate how private digital currencies and central bank money might work together rather than compete with each other.
Digital Pound Lab Brings Together Financial and Blockchain Firms
The Bank of England has selected several organizations to participate in the latest phase of its Digital Pound Lab.
Participants include NOBO Finance, Dun & Bradstreet and Polygon Labs.
NOBO is a UK fintech focused on digital trade-finance infrastructure, while Dun & Bradstreet provides business data, analytics and credit-related services.
Polygon Labs will contribute blockchain infrastructure and smart-contract technology to the project.
The combination brings together traditional financial data, business verification and blockchain-based settlement technology.
Creating a Digital Credit Profile for SMEs
One of the project's workstreams will focus on creating a reusable "bankable profile" for small and medium-sized enterprises.
NOBO, Dun & Bradstreet and Polygon plan to combine information such as wallet transactions, open-finance data and business intelligence.
The objective is to create a more portable way of assessing the financial standing and creditworthiness of smaller businesses.
Polygon's smart-contract infrastructure is expected to help record verified information and manage consent over how that information is used.
For smaller companies, such a system could potentially make it easier to demonstrate their financial credibility when seeking trade finance.
Stablecoins Could Speed Up Invoice Financing
Another part of the experiment will examine invoice factoring backed by electronic bills of lading.
In a potential transaction, an exporter could receive an advance using stablecoin infrastructure after providing the necessary trade documentation.
The UK importer would then complete the final settlement using digital pounds.
This structure could reduce the time between shipping goods and receiving funds, potentially improving cash flow for businesses involved in international trade.
The experiment is particularly relevant because trade-finance transactions can involve multiple intermediaries, currencies and verification procedures.
Polygon Provides Stablecoin Infrastructure
Polygon Labs will provide blockchain infrastructure for the stablecoin portion of the experiment.
The company said its Open Money Stack can support functions including wallets, fiat-to-stablecoin conversion and smart contracts.
The infrastructure is intended to demonstrate how stablecoins could be integrated into broader financial systems rather than operating as isolated crypto assets.
Polygon's participation also highlights the growing interest from blockchain companies in connecting decentralized infrastructure with traditional financial institutions and central-bank systems.
Central Banks Are Exploring Stablecoins and CBDCs
The Bank of England's experiment comes as central banks around the world examine how privately issued stablecoins could interact with potential central bank digital currencies (CBDCs).
Stablecoins are digital tokens designed to maintain a stable value, usually by being linked to a fiat currency such as the U.S. dollar or British pound.
CBDCs, by contrast, would represent digital forms of money issued directly by central banks.
The two systems have different structures, but their ability to operate alongside each other could become increasingly important as digital payments expand.
The BOE's latest experiment is therefore focused not only on the digital pound itself but also on the broader question of interoperability between different forms of digital money.
Digital Pound Decision Has Not Been Made
The Digital Pound Lab should not be interpreted as confirmation that the UK will launch a digital pound.
The Bank of England has emphasized that the project is experimental and does not involve real customers or funds.
The findings will instead contribute to the broader assessment being conducted by the Bank of England and HM Treasury.
The UK authorities are expected to consider the results before determining the next steps for a potential digital pound.
Cross-Border Payments Could Benefit From Digital Money
Cross-border payments remain one of the areas where digital currencies could have a significant impact.
Traditional international transactions can involve several financial institutions, manual compliance checks and settlement delays.
Stablecoins can potentially move value across blockchain networks more quickly, while central bank money could provide a trusted settlement asset within regulated financial systems.
The BOE experiment is therefore testing whether these different advantages can be combined within a single trade-finance workflow.
Small Businesses Could Be a Major Beneficiary
Small and medium-sized businesses could benefit if digital trade-finance systems reduce settlement times and improve access to funding.
When companies ship goods internationally, there can be a significant delay before payment is received.
During that period, working capital can remain tied up.
A system combining digital identity, automated verification, stablecoin payments and central-bank settlement could potentially reduce that gap.
However, the BOE experiment will need to establish whether these technologies can deliver meaningful efficiency improvements while maintaining appropriate compliance and financial safeguards.
Digital Money Moves Toward Interoperability
The latest Digital Pound Lab phase reflects a broader shift in the digital-asset industry.
Rather than treating stablecoins, CBDCs and traditional financial infrastructure as completely separate systems, financial institutions are increasingly exploring how they can interact.
The Bank of England's experiment could provide insight into whether privately issued stablecoins can connect with central-bank money in regulated financial workflows.
If successful, similar models could eventually be applied to other forms of international payments and financial services.
Bank of England Digital Currency Outlook
The Bank of England's latest project provides another indication that central banks are taking digital-money infrastructure seriously.
The experiment will test stablecoin settlement, digital-pound payments, business verification and blockchain-based smart contracts within a controlled environment.
The results could help UK policymakers determine how different forms of digital money should interact as the country's financial system becomes increasingly digital.
However, important questions around regulation, privacy, interoperability and risk will still need to be addressed before such systems could be deployed at scale.
Conclusion
The Bank of England is testing how stablecoins and a potential digital pound could work together in cross-border trade finance.
The Digital Pound Lab's latest phase will examine transactions involving stablecoin payments to exporters and potential digital-pound settlement by UK importers.
With NOBO Finance, Dun & Bradstreet and Polygon Labs participating, the project will also explore digital business profiles, invoice financing and blockchain-based settlement infrastructure.
The experiment does not confirm that the UK will issue a digital pound, but its findings could help shape the country's approach to stablecoins, CBDCs and cross-border digital payments in the coming years.
