Stablecoins Meet the Digital Pound in BoE Trade Test
The Bank of England is testing a trade-finance model where private stablecoins and central bank money handle different parts of the same transaction. For SMEs, faster payment is only useful if verification and financing can move just as quickly.
Key Takeaways
- Stablecoins and central bank money are being tested as complementary payment rails.
- SME financing depends on verified data as much as settlement speed.
- UK law now supports electronic trade documents needed for digital workflows.
- The experiment fits the Bank’s wider push toward an interoperable multi-money system.
One Trade, Two Forms of Digital Money
The Bank of England’s Digital Pound Lab included NOBO Finance, working with Dun & Bradstreet and Polygon, among its Phase 2 participants. Phase 2 has now concluded, with the Bank preparing to publish further findings from the programme. The Bank confirmed the consortium as part of the latest phase.
The Lab is experimental. It uses simulated digital pounds, involves no real customers or real-money payments, and does not mean the Bank has decided to issue a CBDC. The Bank and HM Treasury are still assessing whether a digital pound should move beyond the design phase.
Within the trade-finance use case, an overseas exporter can receive an advance against an invoice through a stablecoin rail, while the UK importer later settles using simulated digital pounds. An electronic bill of lading links the financing to the underlying shipment.
The exporter gains earlier access to liquidity without waiting for the entire transaction to settle, while the importer can complete payment in sterling central bank money. Neither side has to use the same monetary rail from start to finish.
Demonstration digital pounds remain on the Bank’s central ledger, while a separate Hyperledger Besu environment supports smart contracts and digital assets. The Lab also allows assets on that programmable layer to be exchanged against digital pounds without moving the pounds themselves onto a blockchain.
Faster Settlement Only Solves Half the Problem
Sending money in seconds does little for a small exporter if a financier still spends days checking the business, its documents and the underlying transaction.
NOBO’s trade-finance infrastructure combines invoice factoring with electronic bills of lading, business verification and reusable compliance information. Its platform is designed to let SMEs reuse verified KYC and KYB data rather than rebuilding the same compliance file for every transaction. NOBO also supports several settlement rails, including stablecoins, CBDCs, tokenized deposits and conventional payment systems.
Dun & Bradstreet contributes business identity and risk information, while Polygon provides blockchain infrastructure. A lender still has to establish that the exporter exists, the invoice is legitimate, the shipment is real and the credit risk is acceptable.
Automating payment without improving those checks simply moves the final leg faster.
Why SMEs Are a Hard Test for the Model
The Asian Development Bank estimated unmet demand for trade finance at $2.5 trillion in 2025, equivalent to roughly 10% of global trade. SMEs remain particularly exposed, with the latest ADB survey putting their trade-finance rejection rate at 41%. ADB has called for faster digitalisation and wider use of supply-chain finance to improve access.
Britain has already removed one legal obstacle to digitising the process. The Electronic Trade Documents Act 2023 allows qualifying electronic trade documents to perform the same legal functions as their paper equivalents, including bills of lading that historically depended on physical possession.
Recent government pilots suggest document processing can be compressed dramatically before a new payment rail is even introduced.
In a UK-Japan digital-trade trial published in May, the Department for Business and Trade said documentary credit checks that can take banks days were completed in around one hour under pilot conditions. Businesses also reported savings from removing paper shipping documents and automating administrative work.
The Digital Pound Lab links those digital records directly to financing and settlement.
The Bank Is Already Moving Toward a Multi-Money System
The Bank has pushed its stablecoin policy in the same direction.
Its June framework for systemic stablecoins says reliable forms of money should be able to operate alongside one another and exchange smoothly. Faster, cheaper and programmable cross-border payments are among the use cases the Bank sees for regulated stablecoins.
The policy has also become less restrictive for larger payment use cases. As we reported in June, the Bank dropped proposed individual and business holding limits and moved instead toward a temporary £40 billion issuance guardrail for each systemic stablecoin.
Deputy Governor Sarah Breeden has described a future where bank deposits, tokenized deposits, systemic stablecoins and potentially a digital pound coexist rather than one replacing all the others.
The same model is emerging in wholesale markets. The UK is preparing live experiments where tokenized securities may settle against tokenized deposits, qualifying stablecoins or central bank money. Regulators are also exploring several settlement assets rather than designing the market around one mandatory digital currency.
Running several settlement rails creates its own problem: they have to talk to each other.
Different ledgers need common rules for identity, ownership, payment finality and what happens when one side of a transaction succeeds while another fails. The Digital Pound Lab tackles a smaller version of that same problem by connecting a central ledger with a separate programmable environment.
From Prototype to Real-World Trade
A live cross-border system would face harder questions than the prototype: foreign-exchange conversion, stablecoin redemption, sanctions screening, responsibility across jurisdictions and what happens when a payment or digital document fails.
Credit remains the harder constraint. Better data can make an SME easier to assess, and programmable settlement can release money faster once financing is approved. Neither forces a lender to take a risk it does not want.
Better data can shorten the checks before financing is approved, while programmable settlement can shorten what happens after. Neither solves the shortage of credit on its own.
For an SME exporter, success would be much simpler to measure: fewer repeated checks, quicker access to working capital and less time waiting for documents and payments to move between disconnected systems.
- Disclaimer: This article is for informational and educational purposes only. The Digital Pound Lab uses simulated money and does not represent a decision by the Bank of England to launch a digital pound or deploy the tested trade-finance model commercially.
Alex is Editor-in-Chief of Coindoo and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
