Bank of England (BoE) Governor Andrew Bailey speaks during the Monetary Policy Report press conference in London on July 30, 2026.
Henry NICHOLLS/POOL / AFP via Getty Images
A consortium of three companies — NOBO Finance, Dun & Bradstreet, and Polygon Labs — joined Phase 2 of the Bank of England’s Digital Pound Lab to run the first controlled experiment that puts a public stablecoin rail and a simulated digital pound inside a single cross-border payment. The experiment, announced Wednesday and confirmed by the Bank of England’s own Phase 2 participant list, aims to find out whether two structurally different forms of digital money can settle the same commercial transaction without requiring a trusted human intermediary to coordinate them.
The Bank of England has not decided to issue a digital pound. The lab uses no real money. That caveat is not procedural boilerplate — it matters more now than it did when the lab launched in August 2025, because, as of May 2026, Bloomberg reported that the Bank and HM Treasury were discussing whether to slow or pause the digital pound project entirely, amid internal doubts that the marginal benefit of a retail central bank digital currency (CBDC) still justifies the effort when commercial payment systems keep improving. What the lab is producing, then, is evidence — evidence that will feed directly into the joint Bank and HM Treasury assessment expected later this year, when the two institutions are supposed to make a go/no-go call on whether the UK will build a digital pound at all.
Why Both Rails in One Transaction?
A stablecoin and a digital pound are not the same thing, and that difference is exactly what the experiment is designed to stress-test. A stablecoin is a privately issued digital asset pegged to a fiat currency; the digital pound would be a direct liability of the Bank of England — public money rather than a claim on a private issuer. They operate on different technical infrastructure, governed by different legal frameworks, and settle through different mechanisms.
The specific technical challenge the consortium is testing is whether a payment can span both rails and still complete atomically — meaning both legs settle together or neither does. In traditional cross-border finance, multi-instrument settlement carries settlement risk: one side of a transaction completes, the other does not, leaving one party exposed. Smart contracts are designed to solve this by encoding the condition — “settle both legs only when condition X is met” — in executable code rather than in human trust. The question is whether that works across a public blockchain (Polygon) and a central bank’s simulated digital pound infrastructure simultaneously.
Marc Boiron, CEO of Polygon Labs, framed the experiment in terms of a broader policy question: “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,” he said. “This experiment tests exactly that, an exporter paid instantly in stablecoins while the importer settles in a digital pound, in a single flow.”
This question has international resonance beyond the UK. In June 2026, the US Congress passed the 21st Century ROAD to Housing Act, which includes a provision prohibiting the Federal Reserve from issuing a retail CBDC until at least the end of 2030 — a direct digital currency held by households rather than by banks. The US policy assumption is that regulated stablecoins can serve the same public functions. If the Bank of England’s experiment produces evidence that stablecoins and CBDC can interoperate in a single transaction rather than competing for the same monetary function, it validates a multi-money architecture that no major economy has yet demonstrated at scale.
The Problem: Frozen Capital and Broken Credit
The use case the consortium chose is not abstract. Cross-border trade finance for small and medium-sized enterprises is the specific domain in which the payment system’s failures have measurable costs.
The Asian Development Bank’s 2025 Global Trade Finance Gap Survey confirmed that the global trade finance gap — the difference between what SMEs need to finance their exports and what banks will actually lend — stands at $2.5 trillion annually. The survey also recorded a 41% rejection rate for SME trade finance applications, a figure that remains substantially high even as it has narrowed from prior years. Ankita Pandey, relationship manager for the ADB’s trade and supply chain finance program, attributed this gap not to fundamentally weak businesses but to the assessment tools: “Too many applications are still considered unbankable, not because the businesses are fundamentally weak, but because traditional credit models struggle to assess the risk properly.”
The settlement problem compounds the credit problem. A UK exporter who ships goods to an overseas buyer typically must wait days for payment to clear through correspondent banks, manual documentation checks, and foreign exchange conversion — days during which their working capital is effectively frozen. Ayo Ojerinola, founder and CEO of NOBO Finance, named the structural cause: “Trade finance is multi-party by nature, but the workflows, data, and settlement paths still don’t connect cleanly.”
Workstream 1: The Invoice Factoring Flow
The first experiment tests whether a specific, already-understood trade finance instrument — invoice factoring backed by an electronic bill of lading (eBL) — can be automated across two different digital money rails. The GT Review consortium announcement describes the approach in detail.
Invoice factoring explained is not a new instrument. Under the traditional model, an exporter sells its unpaid invoice to a third-party financier (the “factor”) at a discount, receiving an immediate cash advance — typically 70 to 90% of the invoice’s face value. The factor then collects from the importer when the invoice matures. What makes the Bank of England experiment technically novel is the trigger mechanism: instead of a human verifying that the goods were shipped and releasing funds manually, a smart contract monitors the electronic bill of lading. The eBL — a digitized version of the legal document that serves simultaneously as a receipt, title to the goods, and contract of carriage — is issued by the carrier when it takes possession of the goods. That event triggers the smart contract, which releases the stablecoin advance to the exporter on Polygon’s network without a human intermediary authorizing the payment.
On the importer’s side, final settlement flows through the Bank of England’s simulated digital pound rail. The two legs of the transaction — stablecoin on one side, digital pound on the other — are coordinated through Polygon’s Open Money Stack orchestration layer. The Open Money Stack is Polygon Labs’ payments infrastructure product, assembled in part through its Coinme and Sequence acquisition in January 2026 — Coinme contributing US money transmitter licenses and fiat-to-stablecoin conversion infrastructure, Sequence contributing smart wallet tools and cross-chain developer infrastructure.
Polygon’s role as the stablecoin settlement layer reflects a deliberate architectural choice. Ethereum’s mainnet, on which Polygon is built as a Layer 2 scaling solution, processes 15 to 30 transactions per second and has historically cost anywhere from cents to tens of dollars per transaction during congested periods. Polygon’s Proof-of-Stake sidechain achieves a theoretical 65,000 transactions per second at a fraction of a cent per transaction — a cost and throughput profile necessary for trade finance infrastructure that must handle thousands of SME transactions economically. The technical details of this Layer 2 architecture are documented in Polygon’s own development literature.
Workstream 2: The SME Bankable Profile
The second workstream addresses a structurally different problem — not settlement speed but credit access. The SME Bankable Profile is NOBO’s attempt to break the “start from scratch” pattern of SME credit assessment, as the IT Brief announcement details.
Under current trade finance practices, every time an SME approaches a new lender or financing platform, it must submit the same documentation package — financial statements, trading history, compliance records — and wait for the lender to complete the same assessment process independently. The documentation is institution-specific, non-portable, and rebuilt from zero with each new counterparty. This repetition is a friction cost that large multinationals absorb through treasury departments but that SMEs typically cannot.
The Bankable Profile combines three data sources: wallet transaction signals (on-chain payment history, accessed with the SME’s consent), open banking data (account information from UK banks under the Open Banking regulatory framework), and Dun & Bradstreet’s D&B Commercial Graph — including the D-U-N-S business identifier, a nine-digit code that D&B has operated since 1963 and that functions as the closest thing the commercial world has to a globally recognized business identity standard. Sara de la Torre, Head of Financial Services at Dun & Bradstreet, summarized the logic: “Smoother trade finance for SMEs depends on trust — and that starts with reliable business identity and risk data.”
These inputs are combined into a pre-qualified credit outcome that is anchored on Polygon Chain as a smart contract. The critical distinction from a centralized credit file is portability and verifiability: any lender with permission from the SME can query the profile on-chain and read its verified outcome, rather than initiating a new assessment. The profile is not a score in a private database — it is a verifiable credential on a public blockchain, governed by consent rules encoded in the smart contract itself. The experiment will determine whether this architecture produces a result that financiers actually trust.
Where the Experiment Sits in the Broader Decision
The Bank of England launched the Digital Pound Lab in August 2025. Phase 1 concluded with a webinar on January 15, 2026, at which Deputy Governor Sarah Breeden acknowledged the lab’s value in generating practical insights for the next generation of UK retail payment infrastructure. NOBO’s Phase 1 partner was Applied Blockchain; Phase 2 brings in Dun & Bradstreet’s commercial identity data and Polygon’s blockchain infrastructure to build out the identity and settlement components around that earlier conditional-escrow demonstration.
The lab’s twelve Phase 2 participants include CRM.COM, Crunchfish, Finoxy Labs, Focus on Monesave, LINK in collaboration with Consult Hyperion, Leeds City Council with Aire Logic, OneID, TECHT Labs, The Scottish Centre of Excellence in Digital Trust and DLT, Transpact.com, and Yotra Ltd., alongside the NOBO consortium. The full Phase 2 participant list is published on the Bank of England’s website.
The lab’s findings will feed into the Bank and HM Treasury’s joint assessment, which is supposed to determine whether the UK should proceed to build digital pound infrastructure at all — a decision the Bank has repeatedly deferred. A decision of this magnitude requires primary legislation from Parliament before any digital pound could be issued, and a final decision is expected later in 2026. The Bloomberg reporting from May 2026 introduced a new dimension to that timeline: Bank officials were said to be privately encouraging commercial banks to accelerate their own tokenized deposit programs, with Governor Andrew Bailey suggesting he would need “a lot of convincing” that a retail CBDC was necessary if private payment innovations succeeded on their own. The Phase 2 experiments, in that context, are not just proof-of-concept exercises — they are the evidentiary record on which a consequential institutional decision will be made.
What the Experiment Does Not Do
The Bank of England is explicit: the lab tests ideas, not deployments. No real customers participated. No real money moved. Inclusion of a participant’s demonstration in the lab does not imply Bank approval or endorsement of the firm, its products, or its services, as stated on the Phase 2 update page.
The experiment also does not resolve the privacy debate that has followed the digital pound project since its first consultation in 2023. The Bank’s own CBDC Academic Advisory Group has flagged the need for a clear governance framework covering data privacy, fraud prevention, and cybersecurity. The Bank has committed to legislated privacy protections preventing it and the government from accessing personal transaction data — but as Susanna Copson of Big Brother Watch has noted, “with the Bank of England ruling out a digital pound which is anonymous, there is a real danger that this form of digital money is on track to be a digital spycoin.” That tension is not resolved by a successful interoperability test.
What the experiment can resolve is narrower but technically significant: whether two different forms of programmable digital money can be wired together in a single commercial transaction without the settlement falling apart. If the answer is yes, it will not prove that the UK needs a digital pound — but it will prove that if a digital pound exists, it does not have to compete with stablecoins for the same payment function. That is the architectural question behind every multi-money payment system being debated globally, from the EU’s digital euro to the dollar-stablecoin ecosystem that US lawmakers have chosen instead of a Fed-issued retail CBDC.
Frequently Asked QuestionsWhat is the Bank of England Digital Pound Lab, and does this experiment mean the UK is launching a digital pound?
The Digital Pound Lab is an experimental platform the Bank of England launched in August 2025 to test what a digital pound might do in practice — before any decision is made about whether to build one. Phase 2 involves twelve participant groups running controlled experiments using simulated digital pound infrastructure. No real customers or real money are involved, and the Bank has explicitly stated that participation does not signal a launch decision. A go/no-go decision is expected from the Bank and HM Treasury later in 2026, and any digital pound would require an Act of Parliament before it could be issued. As of May 2026, Bloomberg reported that the Bank and HM Treasury were also considering slowing or pausing the project pending further evidence from private-sector payment innovations. Full details on the lab’s structure are available on the Bank of England lab overview page.
What is the difference between a stablecoin and the digital pound, and why does it matter that they’re in the same transaction?
A stablecoin is a privately issued digital asset pegged to a currency — it’s a liability of its issuer, not of the central bank. The digital pound, if issued, would be a direct liability of the Bank of England — the digital equivalent of a banknote. They operate on different infrastructure under different legal frameworks, and historically they’ve been seen as competing monetary forms. The experiment tests whether a single commercial transaction can use both simultaneously: one side settling in stablecoins (on Polygon’s blockchain), the other in digital pounds (on the Bank’s simulated rail), without a human intermediary bridging the two. The technical challenge is whether both legs can settle atomically — together or not at all — which eliminates the settlement risk that exists when two different systems have to coordinate. If this works in the lab, it suggests that CBDC and stablecoins can function as complementary payment rails rather than competitors.
Why is the SME trade finance gap so large, and what would a portable credit profile actually change?
The Asian Development Bank’s most recent survey estimates the global trade finance gap at $2.5 trillion — the difference between what SMEs applying for trade finance need and what banks will actually lend. The structural cause is not SME financial weakness but credit assessment infrastructure: banks currently require each SME to rebuild its documentation and verification case from scratch with every new lender, an expensive and time-consuming process. The SME Bankable Profile being tested in Phase 2 would anchor a verified credit outcome on Polygon’s blockchain, governed by consent rules encoded in a smart contract. In theory, the SME owns the profile and presents it to any new lender — who can query it directly rather than starting from zero. Whether financiers will actually trust a blockchain-anchored credential rather than their own in-house assessment is the core commercial question the experiment is designed to test.
What does the US decision to ban retail CBDC mean for the UK’s digital pound project?
In June 2026, the US Congress passed the 21st Century ROAD to Housing Act, which prohibits the Federal Reserve from issuing a retail CBDC — a direct digital currency held by households rather than by banks — until at least the end of 2030. The US policy bet is that regulated private stablecoins can achieve the same payment modernization goals without state-issued digital money. That choice puts direct pressure on the Bank of England’s deliberations: if the world’s largest economy has decided that stablecoins plus private payment innovation are sufficient, the UK needs a compelling affirmative case for why a central bank-issued digital pound adds something stablecoins cannot provide. The interoperability experiments in Phase 2 can provide part of that answer — or, if they reveal that stablecoins and digital pounds are effectively interchangeable in commercial flows, they may inadvertently strengthen the case for the US approach.