- The Bank of England’s Digital Pound Lab is testing whether stablecoins and a digital pound can work together in cross-border trade.
- The experiment combines instant stablecoin payment for exporters while the importer settles in a digital pound.
The Bank of England’s Digital Pound Lab has tested how privately issued stablecoins and central bank digital money could handle different parts of the same cross-border trade transaction.
The experiment is part of Phase 2 of the central bank’s Digital Pound Lab. NOBO Finance worked with Dun & Bradstreet and Polygon Labs on the use case, according to details released by the consortium on Wednesday.
The Bank had already named the three firms as Phase 2 participants on June 25. The latest disclosure provides more detail on what their experiment was designed to test.
The central idea is a multi-rail trade-finance transaction.
Under the proposed flow, an exporter receives an advance through a stablecoin rail. The UK importer then makes the final settlement using simulated digital pounds, combining private digital money and central bank money within the same transaction workflow.
No real payments were made.
The Digital Pound Lab is a simulated environment and is not a regulatory sandbox. It involves neither real customers nor real money, according to the Bank of England.
It’s worth noting because the experiment demonstrates a possible architecture rather than proving that the model is ready for commercial deployment.
Stablecoins and Central Bank Money in One Transaction
The trade-finance experiment extends work NOBO conducted during the first phase of the Lab.
NOBO was one of four Phase 1 participants, where it worked with Applied Blockchain. Phase 1 examined potential digital-pound applications using building blocks including programmability, verifiable credentials and common standards.
Phase 2 adds Polygon’s blockchain infrastructure and Dun & Bradstreet’s commercial data.
One workstream focuses on invoice factoring backed by an electronic bill of lading, or eBL. An exporter could use the invoice to obtain financing, with the advance settled over the stablecoin network before the importer completes the transaction using digital pounds.
Polygon supports the stablecoin side through its Open Money Stack, which includes blockchain settlement, wallets and fiat on- and off-ramp infrastructure. Polygon currently reports about $2.7 trillion in cumulative transfer volume across its network.
The arrangement effectively separates payment speed from the final settlement asset.
“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,” Polygon Labs CEO Marc Boiron said in a statement shared with AlexaBlockchain.
“This experiment tests exactly that, an exporter paid instantly in stablecoins while the importer settles in a digital pound, in a single flow,” Marc added.
Building a Portable Credit Profile for SMEs
The second part of the project tackles a different trade-finance bottleneck: determining whether a small business is creditworthy.
NOBO, Dun & Bradstreet and Polygon are testing an “SME Bankable Profile” that combines transaction information, open-finance data and commercial risk information.
The goal is to create a reusable credit profile rather than forcing a company to repeat much of the verification process whenever it seeks financing.
Dun & Bradstreet supplies commercial intelligence and risk indicators, while Polygon provides smart-contract infrastructure for consent and the transaction lifecycle.
“Trade finance is multi-party by nature, but the workflows, data, and settlement paths still don’t connect cleanly,” NOBO founder and CEO Ayo Ojerinola said.
“The Digital Pound Lab gives us a safe environment to test our innovations, improving coordination across participants, and transforming how cross-border trade actually works today.”
Why Does It Matter?
The experiment points to a potentially more consequential role for a digital pound than simply creating another way for consumers to pay.
It tests whether central bank money could act as the settlement anchor while private digital-money networks provide additional functionality and faster movement of funds.
That broadly aligns with the Bank of England’s emerging approach to a “multi-money” system rather than one in which a digital pound replaces private alternatives. The Bank’s recently finalised framework for systemic sterling stablecoins, for example, stresses interoperability and direct access to payment systems so stablecoin redemption can ultimately settle in central bank money.
That interoperability could be particularly useful for trade finance because payment is only one part of the problem.
Invoices, identity checks, credit decisions, shipping documentation and settlement can sit across different systems. Bringing them into a coordinated digital workflow could shorten the period in which an exporter has shipped goods but is still waiting for cash.
The UK’s legal framework has also moved in that direction. The Electronic Trade Documents Act 2023 gave qualifying electronic trade documents, including electronic bills of lading, the same legal effect as their paper equivalents.
Central Banks Are Testing Similar Models
The Bank of England is not alone in exploring how public and private forms of digital money can coexist.
The BIS-led Project Agorá is testing a shared infrastructure that connects tokenised commercial-bank deposits with tokenised central-bank reserves for cross-border transactions.
In July, 28 financial institutions and central banks conducted real-value transactions worth about CHF 800,000 across 17 scenarios. The BIS said the exercise demonstrated the feasibility of settling transactions using tokenised deposits and reserves on a programmable multi-currency platform.
Hong Kong has followed a related path. Its e-HKD experiments found that a retail CBDC and tokenised deposits could potentially support programmable and more efficient transactions, while Project Ensemble is developing infrastructure for tokenised assets and money.
The approaches differ, but they share a common premise: the future payment system may contain several forms of digital money that need to operate together rather than one rail replacing all the others.
The Digital Pound Decision Still Comes Later
None of the experiments mean Britain has decided to issue a digital pound.
The Bank of England and HM Treasury remain in the design phase, which is due to end in 2026. The work underway now will feed into a joint assessment of whether the UK should proceed to a further development stage.
Even if policymakers decide to move forward, a digital pound could not be introduced without primary legislation approved by Parliament.
Phase 2 itself has concluded, and the Bank has said it plans to publish further findings from both phases.
The trade-finance experiment therefore provides evidence for a larger policy question.
If Britain eventually introduces a digital pound, the more important issue may not be whether it can compete with stablecoins, but whether central bank money, private digital currencies and commercial financial infrastructure can settle transactions across the same economic workflow without recreating the fragmentation they are intended to remove.
The above article “Bank of England Tests Stablecoins and Digital Pound in the Same Cross-Border Trade Flow” was first published on AlexaBlockchain. Read the complete article here: https://alexablockchain.com/bank-of-england-tests-stablecoins-and-digital-pound-in-the-same-cross-border-trade-flow/
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