CoinDesk
The Bank of England moved its digital pound project into Phase 2 on Wednesday, becoming the first G7 central bank to test how public stablecoins and a state-issued CBDC can interoperate in a single payment flow. Run through the BOE's Digital Pound Lab, the experiment focuses on cross-border trade finance, with NOBO Finance, Dun & Bradstreet and Polygon Labs as private-sector partners. Exporters in the model receive stablecoin advances while UK importers settle in digital pounds, all backed by a reusable "bankable profile" for small businesses. The lab uses no real money or customers, but its findings feed the BOE and HM Treasury's joint digital-pound assessment later this year.
Why it matters
This is the structural question every G7 central bank is wrestling with: do private stablecoins and a state-issued CBDC compete for the same rail, or do they slot together? The BOE's experiment explicitly tests the coexistence thesis: public and private digital money operating in one flow rather than forcing firms onto a single infrastructure. The trade-finance wedge is deliberate. Cross-border SME payments are still slowed by fragmented verification and multi-day settlement, which freezes working capital; if stablecoins can plug the funding gap on the exporter side while digital pounds clear the importer leg, the model reframes how central banks think about private-sector stablecoin rails.
Market impact
Polygon Labs is the named crypto-native counterparty, providing the stablecoin settlement layer through its Open Money Stack, including wallets, smart contracts and fiat conversion. For POL, the read is legitimization at the central-bank tier, the same way the BOE's wholesale CBDC work dragged RWA tokenization into the policy conversation in 2024. The invoice-factoring design also gives the BOE a clean answer to the "stablecoins cannibalise CBDC" critique: rather than competing, the two forms do different jobs on the same transaction. Watch the BOE and Treasury's joint assessment later this year for language on whether the coexistence model becomes a formal design principle, or gets pushed back to Phase 3.
Frequently asked questions
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What is the BOE's Digital Pound Lab testing in Phase 2?
The Bank of England's Digital Pound Lab is testing how public stablecoins and a potential central bank digital currency can interoperate in a single cross-border trade-finance payment flow. Phase 2 partners are NOBO Finance, Dun & Bradstreet, and Polygon Labs.
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Who are the private-sector partners in the BOE experiment?
The named partners are NOBO Finance, a UK fintech building digital trade-finance infrastructure for SMEs, Dun & Bradstreet, a business-data and credit-rating provider, and Polygon Labs, providing stablecoin settlement infrastructure through its Open Money Stack.
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Why is the BOE combining stablecoins with a digital pound?
The experiment tests whether private stablecoins and a state-issued CBDC can coexist in one payment flow rather than compete for the same rail. Exporters receive stablecoin advances while UK importers settle in digital pounds, addressing cross-border trade-finance delays that freeze SME working capital.
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Does this mean the BOE will issue a digital pound?
No. The lab uses no real money or customers and does not signal any decision to issue a digital pound. Findings feed into the BOE and HM Treasury's joint digital-pound assessment later this year.
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What role is Polygon Labs playing in the BOE project?
Polygon Labs is providing the stablecoin settlement layer through its Open Money Stack, including fiat-to-stablecoin conversion, wallets, and smart contracts. CEO Marc Boiron said the experiment tests whether public and private digital money have to work together.
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