Bank of England uses Polygon in cross-border trade finance trial

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Bank of England uses Polygon

Highlights

Bank of England is testing digital pound trade finance.
Polygon will provide stablecoin and smart contract tools.
The trial will link stablecoins with digital pounds.
SMEs could reuse verified financial profiles.

The consortium includes NOBO Finance, Dun & Bradstreet, and Polygon Labs, with Polygon supplying wallets, smart contracts, and stablecoin settlement through its Open Money Stack, according to Crypto.News. The tests use simulated money and involve no real customers, allowing the participants to examine payment flows without exposing the financial system to live transactions.

Trade finance moves into Phase 2

NOBO previously tested conditional business-to-business payments during Phase 1 of the Digital Pound Lab. The Bank of England confirmed that the company has returned for Phase 2 in collaboration with Dun & Bradstreet and Polygon, alongside other participants exploring new payment models.

One workstream will create a reusable credit profile for small and medium-sized businesses. Transaction information from consent-based wallets would be combined with open-finance data and commercial intelligence, giving lenders a verified assessment that could follow a company between financing providers.

The second experiment tackles settlement directly. An exporter would receive an advance in stablecoins against an electronic bill of lading, while a British importer would complete the final payment using simulated digital pounds. The structure tests whether privately issued digital money and central bank money can handle different stages of the same commercial transaction.

Digital pound decision still open

The experiment does not mean Britain has decided to issue a digital pound. The Bank of England has repeatedly described the Lab as a testing environment designed to inform a later decision on whether a retail CBDC should be built. Participants have no policy-making role, and their inclusion does not amount to Bank endorsement of their technology.

That distinction matters as the UK develops a payment system that may eventually accommodate several forms of digital money. The Bank has been studying interoperability between a potential digital pound, existing payment systems, and privately issued digital assets rather than assuming one form will replace the others.

For trade finance, the practical question is whether programmable settlement and reusable business credentials can shorten payment cycles and free working capital that is otherwise trapped between shipment and payment. The Polygon trial gives the Bank of England a controlled way to test that proposition before any decision on a digital pound moves beyond experimentation.

We also reported the Bank of England and FCA's move to tighten oversight of payment stablecoins.

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