Germany's Bundesbank has tested a blockchain-based settlement interface for electronic securities. The test demonstrates that new technologies and conventional payment systems can work to settle securities in central bank money without relying on a central bank digital currency (CBDC).

In conjunction with Deutsche Börse and the German Finance Energy, the Bundesbank announced Wednesday that, for demonstration purposes, the test had created a 10-year government bond issued using distributed ledger technology (DLT) with subsequent trading in primary and secondary markets settled in the same system.

It then developed a "trigger solution," and connected the DLT securities system with the eurosystem's large-value payment system TARGET2. In this interface, a "trigger" is initiated when a transaction has been settled on the DLT system, signaling to TARGET2 that money can change hands.

The project invovled a number of market participants, including Barclays, Citibank, Commerzbank, DZ Bank, Goldman Sachs and Société Générale.

According to the Bundesbank, this process runs counter to blockchain-based settlement using a CBDC that would tokenize assets and money.

The announcement claimed this solution could be replicated and scaled in a short space of time, compared to the length of time it would take to issue a CBDC.

In contrast with its counterparts in other countries like France and the Netherlands, the Bundesbank has been rather unenthusiastic about the launch of a digital euro, claiming it would destabilize the banking system and penalize savers.

See also: ECB Wants to Be Able to Veto Stablecoins Like Diem in the EU

This is important as it can be assumed the Bundesbank would hold considerable sway in talks over the development of a digital euro, as Germany's is the largest economy in the eurozone.

The European Central Bank (ECB) has attempted to convince the German central bank of the merits of a digital euro, with officials stating Thursday such a currency would be designed to ensure it does not compete with bank deposits.