Summary
The Bank of England's Phase 2 Digital Pound Lab experiment tests whether public stablecoin infrastructure and central bank money can coexist in a single payment flow for trade finance. Working with NOBO Finance, Dun & Bradstreet and Polygon Labs, the BOE is exploring reusable credit profiles for small enterprises and using stablecoins alongside a potential digital pound for invoice factoring — addressing a central question facing central banks globally about how different forms of digital money can interoperate.
Key Points
- The Phase 2 shift: The BOE moved its digital pound exploration into Phase 2, testing whether public stablecoin infrastructure and central bank money can coexist in a single payment flow for trade finance. The BOE has been experimenting with a CBDC and distributed-ledger technology since 2024.
- The participants: The BOE named NOBO Finance, Dun & Bradstreet and Polygon Labs as participants in its Digital Pound Lab. NOBO, a UK-based fintech building digital trade finance infrastructure for SMEs, was already involved in Phase 1, where it helped demonstrate conditional business-to-business escrow payments.
- The SME "bankable profile" workstream: NOBO, Dun & Bradstreet and Polygon plan to combine wallet transaction data, open-finance information and business intelligence to create a reusable credit assessment. Polygon will provide smart contracts intended to record the verified outcome and manage consent.
- The invoice factoring workstream: The group will experiment with invoice factoring backed by electronic bills of lading. An exporter would receive an advance through stablecoin technology, while a UK importer makes final settlement in digital pounds.
- The Polygon infrastructure: Polygon will provide the stablecoin settlement infrastructure through its Open Money Stack, including fiat-to-stablecoin conversion, wallets and smart contracts. Polygon CEO Marc Boiron: "For digital money to actually move the world's trade, its different forms have to work together — public and private, central bank money and stablecoins."
- The trade-finance rationale: Cross-border SME trade finance is still slowed by fragmented verification, manual checks and settlement that can take days. For small businesses, the gap between shipping goods and receiving payment is frozen capital. Trade-finance delays make it harder for firms to prove creditworthiness and access funding.
- The constraints: The lab uses no real customers or money and does not signal any decision to issue a digital pound.
- The significance: The findings will feed into the BOE and the Treasury's joint assessment of the digital pound ahead of its next steps later this year. The broader question is whether different forms of digital money can interoperate, instead of forcing companies and customers onto a single payment infrastructure. This reflects a global shift among central banks toward treating stablecoins as complementary to CBDCs rather than competitors, shaping the future architecture of cross-border payments and trade finance.