Digital Pound Lab Phase 2 Update Released by Bank of England

The Bank of England published the Digital Pound Lab Phase 2 update in early October 2026, summarizing results from experiments that ran from August 2025 through July 2026. The report details simulated retail payment capabilities tested on an experimental platform that used APIs, a relational database ledger, sample applications, and a Hyperledger Besu smart contract environment.

Digital Pound Lab Phase 2 Findings and Use Cases

Phase 2 focused on innovative retail payment journeys while reusing elements from Phase 1. Bank of England teams working with Accenture demonstrated one-time aliases for privacy protection, Confirmation of Payee checks, expanded group payment locks, External Service Interface Provider connections, extended allowances for e-commerce, and streaming micropayments tied to usage conditions. These demonstrations showed how a limited set of building blocks, such as aliases, conditional locks, and verifiable credentials, can combine to support varied experiences.

Across both phases more than 30 payment journeys were shown. Examples include point-of-sale and online retail transactions, ATM cash access and deposits, offline payments with double-spend controls, programmable public-sector payments, trade finance with delivery-versus-payment settlement, delegated allowances, request-to-pay flows, embedded finance scenarios, and identity-linked services. Participants included CRM.COM for loyalty programs, Crunchfish for offline reserve-pay-settle mechanics, Finoxy Labs for multi-journey programmable wallets, LINK and Consult Hyperion for ATM interoperability, Leeds City Council and Aire Logic for local authority payments, NOBO Finance with Dun & Bradstreet and Polygon for SME credit profiles and cross-border trade finance, OneID for digital verification, and Monesave for voice and wearable payments.

All testing remained in a simulated environment with no real customers or funds involved. The platform model allowed external firms to connect through standard interfaces and test combinations of features rather than isolated functions. Key outputs emphasized that reusable components and common standards enable broader innovation when applied together.

Context of Ongoing Digital Pound Design Work

The Digital Pound Lab forms part of the design phase that continues through 2026. A blueprint document and a joint assessment by the Bank of England and HM Treasury are scheduled for release later in 2026, after which a decision on next steps will be taken. No decision on issuance has been made. Any eventual launch would require legislation and could not occur before the second half of the decade if approved.

Deputy Governor Sarah Breeden stated in October 2026 that authorities see no need to accelerate timelines. Stablecoins and tokenized deposits, alongside planned upgrades to the Real-Time Gross Settlement system for 24/7 settlement, may deliver comparable functionality without a central bank digital currency. The Bank continues separate work on a stablecoin regulatory regime, with draft rules under consultation and finalization targeted for the end of 2026.

Findings from the Lab will inform both digital pound development and wider retail payments policy. Areas under review include delegation mechanisms, identity standards, and AI-enabled commerce flows. The emphasis remains on identifying standards that support interoperability while maintaining safety and efficiency in the payments system.

Next Steps After the Lab Experiments

The Bank of England will incorporate Lab outputs into its ongoing digital pound work program and into broader discussions on retail payments innovation. External participants have already indicated plans to adapt tested components for commercial applications outside the experimental setting. Regulators will monitor how reusable building blocks perform when scaled beyond simulation.

Stakeholders can review the full Phase 2 update and supporting materials on the Bank of England website. Further publications on design choices and regulatory developments are expected before the end of 2026.