The Bank of Italy has published a detailed research report modeling what could happen to the Ethereum blockchain’s security and settlement capacity under a hypothetical scenario in which the price of Ether (ETH) fell to zero. The study highlights how risks traditionally associated with volatile token markets could cascade into operational, infrastructure and financial stability vulnerabilities if widely used blockchain networks like Ethereum were stressed beyond normal market parameters.
Extreme Scenario Stress Test on Ethereum
In its research paper titled “What if Ether Goes to Zero? How Market Risk Becomes Infrastructure Risk in Crypto,”Bank of Italy economist Claudia Biancotti examines how a dramatic collapse in ether’s value might affect critical components of Ethereum’s proof-of-stake consensus mechanism and its role as a settlement layer for financial activity. Rather than treating Ether only as a speculative asset, the central bank frames it as a core input into the network’s operational infrastructure.
The analysis focuses on the economic incentives of validators — independent participants who secure the network by staking ETH and earning rewards paid in ETH. If ETH’s price collapsed to near-zero, the value of these rewards would erode, prompting many validators to exit the network. This reduction in staking participation would diminish the total economic stake protecting the blockchain, slow block production, and degrade the network’s capacity to resist attacks or deliver timely transaction settlement.
From Market Risk to Infrastructure Risk
The Bank of Italy’s report emphasizes that such a shock would have operational consequences far beyond speculative trading losses because Ethereum increasingly serves as a settlement backbone for numerous decentralized financial services — including stablecoins and tokenized financial instruments that depend on the network for ordering transactions and finalizing settlement. Under the extreme scenario, disruptions could ripple through payment and settlement infrastructure, potentially impacting broader financial networks monitored by regulators.
“This framing allows the Bank of Italy to trace how market risk in the base token can morph into operational and infrastructure risk for instruments built on top,” the paper states, underscoring the growing overlap between digital asset markets and financial infrastructure.
Validator Incentives and Network Security
A key feature of the study is its analysis of validator economics under stress. Because validators receive compensation in ETH, a catastrophic price drop could make continued participation financially unattractive, leading to a drop in the total stake securing Ethereum. As the stake shrinks, so does the network’s resilience to malicious actors and its ability to maintain transaction finality and settlement reliability.
By framing ETH as both a collateral-like asset for validators and a fee token for transactions, the Bank of Italy highlights how volatility in the native token’s market value could translate directly into infrastructure reliability concerns.
Broader Regulatory Context and Systemic Warnings
The Bank of Italy’s study aligns with recent warnings by other international bodies such as the European Central Bank (ECB) and the International Monetary Fund (IMF), which have cautioned that large stablecoins and blockchain-based financial instruments could pose systemic risks if left unchecked. The ECB’s Financial Stability Review from late 2025 noted structural vulnerabilities in stablecoin markets and their potential links to traditional finance.
The Italian report also outlines potential regulatory responses, suggesting two broad approaches: treating public blockchains as unsuitable for regulated financial services due to their reliance on volatile native tokens or allowing their use while imposing risk mitigation measures such as business-continuity plans, contingency chains and minimum standards for validator participation.
Implications for Financial Stability Oversight
While the extreme “ETH to zero” scenario is theoretical and not a prediction, the study underlines the need for regulators and market participants to better understand the contagion channels that could transform market risk into infrastructure risk. As blockchain networks become more intertwined with traditional financial services, these insights could inform future regulatory frameworks and oversight strategies intended to safeguard financial stability.
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