The Bank of England’s Digital Pound Lab is currently testing a new scenario: combining stablecoins and the digital pound in a single cross-border payment flow for trade finance. This experiment is being conducted with the involvement of three other institutions: NOBO Finance, Dun & Bradstreet, and Polygon Labs.
The test scenario positions exporters to receive their advance payments through a stablecoin pathway. Meanwhile, UK-based importers settle their remaining payments using simulated digital pound money.
Easing SME Financing Constraints
The primary goal of this experiment is to cut settlement times and ease financing constraints for SMEs operating in the cross-border trade sector. Alongside the integration of payment pathways, a second workflow in this trial specifically focuses on constructing reusable SME credit profiles.
The credit profile is constructed by combining three primary information sources: transaction data, open-finance features, and commercial risk data supplied by Dun & Bradstreet. In this workflow, Polygon Labs is responsible for providing the necessary smart contract infrastructure. However, the Digital Pound Lab emphasized that all of these experiments do not involve retail customers or the circulation of real money. The UK central bank has also not made any binding commitment to actually issue a digital pound to the public.
$52.8 Billion Reserve Limit and 2027 Target
This trial step aligns with the regulatory calendar of the UK financial authorities. In June 2026, the Bank of England circulated a draft regulation for the operation of systemic sterling-backed stablecoins. The draft regulation allows issuers to hold up to 70% of their reserves in the form of interest-bearing government debt instruments. In addition, there is a temporary issuance quota limit set at £40 billion, or approximately $52.8 billion, for each systemic stablecoin entity.
The Bank of England aims to finalize this entire stablecoin regulatory framework by the end of 2026, targeting a launch phase in 2027. To support the smooth operation of this hybrid infrastructure in the future, the central bank proposed in May 2026 that the RTGS and CHAPS systems operate nearly 24/7, including on weekends. This extension of operating hours is designed to support cross-border payment systems and new settlement models.
The Role of the Sandbox in Digital Bonds
While digital money regulations are being drafted, adoption at the UK institutional level continues to grow. HSBC Orion recently received the green light to fully operate within the UK Digital Securities Sandbox. The HSBC platform is projected to soon support the issuance process of various new digital bonds in the local market.
This facility is also prepared to accommodate the launch of official UK government bond instruments, known as the Digital Gilt Instrument.
As reported by Cointelegraph.
Read also: What Is DeFi (Decentralized Finance)?
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
