The BOE's Digital Pound Lab will investigate interoperability between stablecoins and a potential digital pound for trade finance transactions.
By Olivier Acuna|Edited by Sheldon Reback47 min ago3 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on The Bank of England is set to conduct experiments involving stablecoins and a digital pound for cross-border transactions. (Unsplash)SummaryShow- The Bank of England has advanced its digital pound initiative to Phase 2, focusing on the integration of public stablecoins and central bank money within trade finance.
- Collaborating with NOBO Finance, Dun & Bradstreet, and Polygon Labs, the BOE will investigate the creation of reusable credit profiles for small businesses, utilizing stablecoins alongside a prospective digital pound for invoice financing.
- These tests, which will not involve actual customers or funds, aim to guide the BOE and the Treasury in understanding how various forms of digital currencies can work together.
The Bank of England (BOE) is embarking on a project to assess how stablecoins can be integrated with a digital pound, as central banks around the world seek to modernize cross-border finance.
Transitioning to Phase 2 of its digital pound project, the BOE is investigating the compatibility of public stablecoin systems with central bank digital currency (CBDC) for trade finance, which was announced on Wednesday. The BOE has been researching CBDCs and blockchain technology since 2024.
Globally, central banks are examining the regulation of private stablecoins—cryptocurrencies tied to traditional currencies—alongside their own potential digital currencies. Otto Jacobsson, the U.K. chapter lead at the Digital Assets Association, noted that improving trade finance could significantly aid small businesses, which often struggle with creditworthiness and funding due to delays. “We could see U.K. companies unlock working capital faster, facilitating smoother international trade if these processes are made more efficient,” Jacobsson stated in a LinkedIn interview.
NOBO Finance, Dun & Bradstreet, a provider of analytics and credit rating services, and Polygon Labs, a blockchain software company, are involved in the BOE's Digital Pound Lab.
This initiative marks the first time the lab will explore how public stablecoins and central bank money can function together in trade finance, while also developing a portable credit identity for small businesses. Importantly, no real transactions or customers will be used in these experiments, and they do not indicate a commitment to launch a digital pound.
NOBO, which is enhancing digital trade finance infrastructure to assist small and medium-sized enterprises (SMEs), was already part of the initial phase. In Phase 1, NOBO demonstrated conditional B2B escrow payments relevant to trade finance.
One of the initial workstreams will focus on creating a "bankable profile" for SMEs. The collaboration aims to merge wallet transaction data, open finance details, and business intelligence to establish a reusable credit assessment, with Polygon providing smart contracts to manage consent and record outcomes.
Additionally, the group plans to test invoice factoring supported by electronic bills of lading, where an exporter could receive an advance via stablecoin technology, while a U.K. importer would settle the final payment in digital pounds.
“For digital currencies to effectively facilitate global trade, they must be able to interoperate—both public and private, as well as stablecoins and central bank money,” remarked Marc Boiron, CEO of Polygon Labs. “This experiment is designed to assess that capability.”
Polygon will offer the necessary infrastructure for stablecoin settlements through its Open Money Stack, which includes fiat-to-stablecoin conversions, wallets, and smart contracts.
The insights gained from this project will contribute to the BOE and the Treasury's evaluation of the digital pound as they plan future actions later this year. The overarching inquiry is whether different digital currency forms can work in concert, rather than forcing users onto a single payment system.
“The complexities of cross-border trade finance for SMEs are exacerbated by fragmented verification processes, manual checks, and prolonged settlement times,” the group stated. “For small enterprises, the delay between shipping goods and receiving payment translates into frozen capital.”
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