Digital Pound Lab: Phase 1 update

Phase 1 overview

This page summarises the key outputs from Phase 1 of the Digital Pound Lab. Phase 2 is underway and applications are open until March 2026. Find out how to apply.

During Phase 1, two sets of demonstration use cases were developed:

1. Bank-developed use cases: built by the Bank of England (the Bank) in partnership with Accenture (Lab delivery partner) to demonstrate some of the Lab’s capabilities.
2. Participants’ use cases: built by the Phase 1 participants – Fluxpay Limited; LINK, in collaboration with Consult Hyperion; NOBO Finance, in collaboration with Applied Blockchain; and Yotra Limited.

We held a webinar on 15 January 2026 to showcase some of those use cases. In her opening remarks, Sarah Breeden (Deputy Governor for Financial Stability) recognised the value of the Digital Pound Lab in producing practical insights to inform the next generation of UK retail payments infrastructure.

By sharing these demonstrations, we aim to show how the capabilities built in the Lab can support a range of use cases, and how innovative payment services can be developed from a basic set of building blocks, including aliases, trusted or verifiable credentials, programmability features and common standards.

Figure 1: Overview of the Digital Pound Lab

Bank-developed use case demos

The Lab includes a range of capabilities intended to stimulate ideas for innovative use cases. For details on its design, including capabilities, see the Digital Pound Lab main page.

The demonstrations below explore a base set of payments use cases as examples of how some of the Lab’s capabilities might be used to support a range of payments services. 

We have also developed some sample applications to support the demonstration of these use cases, including:

• mobile wallet applications for two sample PIPs, called ‘Barley’ and ‘Oat’. Some aliases used in the Lab reference the sample PIPs (eg LUCAS@BARLEY) – these are called PIP-bound aliases
• web wallet applications for Barley and Oat
• an e-commerce website in the form of a bookstore called ‘Baseline’
• a mobile merchant application for the Baseline bookstore, to accept payments at point of sale and give refunds
• a chat application to explore integrating payments with third-party applications
• a digital assets marketplace for buying digital assets from Baseline using the Lab’s smart contract capability

All aliases and personal details presented in these demonstrations are fictitious and used solely for experimentation purposes; they do not relate to any real individuals or businesses.

Verifiable credentials

Verifiable credentials, also known as trusted credentials, enable users to prove specific characteristics about themselves in a privacy-preserving way. In the Lab, these credentials map to payment aliases for secure payee authentication, ensuring payments go to the intended recipient. At creation, each account is automatically assigned a random alias, with a corresponding verifiable credential for privacy. Users may also add additional aliases, such as random strings, phone numbers or email addresses, as needed. This underlying data (including the alias and other relevant details) is shared with relevant PIPs for anti-money laundering compliance during the payment process but is never accessed by the demonstration ledger or its operator.

Verifiable credentials enable many of the use cases explored in Phase 1.

Payment requests

Users can send payment requests using the payer’s alias or via Quick Response (QR). This works in-app, and across PIPs, by utilising our common verifiable credentials framework and messaging standard for requests. Verifiable credentials support the use of QR by enabling the payer to check that the QR code presents details of the intended payee. Each QR code is digitally signed, providing protection against spoofing or unauthorised alteration.

Digital cheques

The ‘digital cheques’ use case enables a user or business to make a payment without knowing the payee’s alias. This use case, enabled by verifiable credentials and QR payment initiation, means individuals or businesses can pay anyone by displaying or sending (by email, post or otherwise) a QR code with attached conditions. For example, a user or business could send a payment that can only be redeemed by a user who meets the conditions specified. 

The video below gives an example of how the use case could be implemented. While this example requires the payer to input the name of the user they want to pay, it could be extended to enable other conditions, such as the payee’s name and address or any other attribute included in their verifiable credential.

Allowances

Allowances enable a user to permit another user, application or merchant to spend money from their wallet up to a specified amount and within a specified timeframe. Additional conditions can also be set – for example, the primary user may require that each payment is approved before it goes through. 

Allowances grant permission to spend – they do not set funds aside. The primary user can still use the money themselves even when an allowance has been granted.

The video below demonstrates person-to-person payments, but this has potential to be extended to agentic or Internet-of-Things payments in the future. 

E-commerce

We have implemented two e-commerce user journeys via our sample e-commerce website: delivery-versus-payment when paying for hardcover books, which require shipping, and request-to-pay when paying for e-books, which are delivered instantly. 

The video below demonstrates delivery-versus-payment for the hardcover books. This use case uses locks – a programmability feature that enables users to set money aside until certain conditions are met. Unlike allowances, the money held in locks  cannot be spent until the conditions are met or the lock expires. In this case, the user allows the money to be released to the Baseline merchant when the books are shipped.

Merchant mobile application

The mobile merchant application enables a merchant to accept payments at point of sale, including cashback. Merchants can also give full or partial refunds within the merchant wallet application.

The current implementation supports QR payments for ease of demonstration, but we will look to extend to NFC.

Chat application integration

We have developed two use cases with the mock chat application to demonstrate connecting users’ wallets to third-party applications – person-to-person payments and collaborative payments (or ‘kitties’).

Kitties enable members of a group chat to contribute funds to a shared cause (eg a birthday present or event). We developed this use case using locks, which set money aside until the condition set by the user is met (eg a certain amount is raised or a certain number of people have paid). If the lock expires before the condition is met, the money, previously set aside, is returned to the relevant payees.  

Other capabilities used to develop these use cases include ESIP connections, aliases and request-to-pay.

Blockchain interoperability

This use case explores interoperability between blockchain and non-blockchain ledgers. It uses Hyperledger Cacti, a blockchain oracle which acts as a communication bridge between on-chain, allowlisted smart contracts and off-chain systems such as the Lab’s demonstration ledger. This bridge enables users to initiate atomic transactions across the smart contract platform and the demonstration ledger. 

In the video below, the purchase is initiated on a blockchain ledger, then confirmed on the demonstration ledger, which is centralised. The asset and funds are swapped atomically, demonstrating seamless interoperability between the two systems. Although a non-fungible token (NFT) swap is used as the example, this could be extended to other digital assets.

Participant use case demos

We invited organisations to apply to test a small number of use cases in Phase 1, including point-of-sale, tiered wallets, micro merchants, conditional business-to-business payments, omni-channel payments and temporary tourist wallets. We selected Phase 1 participants  in accordance with the Lab’s terms of participation.

Some of their demonstrations include integration with our sample wallet applications and e-commerce website, showcasing interoperability and consistency across different PIPs. 

The policy choices in these demonstrations were determined by the participants for the purpose of the experiment and should not be taken as an indication of future Bank policy. In addition, inclusion of participants’ demonstration videos in this update does not imply Bank approval or endorsement of the firms, their products or their services.

Fluxpay Limited

Fluxpay explored tiered wallets and tourist wallets, as well as point-of-sale and e-commerce payments. They developed a proof-of-concept digital wallet platform with tiered ‘know your customer’ (KYC) features.

LINK, in collaboration with Consult Hyperion

LINK and Consult Hyperion, explored the integration of a digital pound with existing infrastructure to make point-of-sale payments. Their solution uses the LINK messaging network to demonstrate point-of-sale payments and cash withdrawals (cashback with and without purchase) through digital pound wallets.

NOBO Finance, in collaboration with Applied Blockchain

NOBO Finance and Applied Blockchain explored conditional business-to-business payments. Their solution demonstrates how cross-border trade finance could be streamlined and made more accessible for small and medium-sized enterprises, leveraging Applied Blockchain’s Silent Data technology and the locking features available in the Lab.

Yotra Limited

Yotra explored omni-channel payments, tiered wallets and tourist wallets. Their solution is a transport payment platform designed from the perspective of transport operators, residents and visitors, allowing for a frictionless payment experience across travel networks.

Looking ahead

Despite the narrow scope of Phase 1, the Lab’s capabilities allowed a range of use cases, touching on important everyday payments such as point-of-sale and e-commerce, as well as pushing the boundaries through blockchain interoperability.

Phase 2 is broader and aims to test innovative use cases that demonstrate payment services that do not yet exist. It will run until July 2026 and we will host a showcase event to demonstrate those use cases. Although applications for Phase 2 are open until March 2026, we encourage early applications. Details on how to apply can be found on the Digital Pound Lab webpage.

Please contact us at digitalpoundlab@bankofengland.co.uk if you have any questions on how to get involved in Phase 2.