The Bank of Italy modeled what would happen to Ethereum’s security and settlement capacity if the price of Ether fell to zero, treating the network as a critical financial infrastructure and not just a speculative crypto asset.
In a recent study paper titled “What if Ether falls to zero? How market risk becomes infrastructure risk in cryptocurrencies,” Bank of Italy economist Claudia Biancotti examined how an extreme price shock in Ether (ETH) could impact Ethereum-based financial services, which rely on the network to process and settle transactions.
Biancotti focused on the link between the economic incentives of validators and the stability of the underlying blockchain used by stablecoins and other tokenized assets.
The article presents a model of how validators rewarded in ETH would react if the token price dropped and their rewards lost their value.
In such a scenario, some validators would rationally leave, Biancotti argues, which would reduce the overall stake securing the network, ponderous block production and weaken Ethereum’s ability to withstand certain attacks and guarantee timely, final settlement of transactions.
When ETH price risk becomes infrastructure risk
Rather than treating Ether solely as a volatile investment, the study identified it as an indispensable input to the settlement infrastructure used by a growing portion of onchain financial activity.
Related: The risks associated with the stablecoin are perceived as minimal in Europe due to the low level of acceptance and MiCA: ECB
Biancotti argues that Ethereum is increasingly used as a settlement layer for financial instruments, so shocks to the value of the native token could reduce the reliability of the underlying infrastructure.
Such a framework allows the Bank of Italy to trace how market risk in the base token can transform into operational and infrastructure risk for the instruments built on top, from fiat-based stablecoins to tokenized securities whose ordering and transaction completion depend on Ethereum.
The paper highlights that under such stress, disruptions would not be narrow to speculative trading but could spill over into payment and settlement employ cases, which regulators are increasingly monitoring.
Related: The IMF sets out guidelines for preventing risks from stablecoins that go beyond regulation
ECB warnings on side effects for stablecoins
Other authorities, including the International Monetary Fund and the European Central Bank (ECB), have warned that immense stablecoins could become systemically vital and pose risks to financial stability if they continue to grow rapidly and remain concentrated in a handful of issuers.
ECB Financial Stability Review report published in November 2025, noted that the structural weaknesses of stablecoins and their links to classic finance mean that a major shock could trigger panic, asset sales (quickly selling reserve assets at discounted prices to meet redemptions) and deposit outflows, particularly if adoption expands beyond cryptocurrency trading.
The Bank of Italy said regulators face a arduous compromise on whether and how supervised intermediaries should be able to rely on public blockchains for financial services.
It outlines two options: either treat today’s public networks as unsuitable for employ in regulated financial infrastructure because they depend on volatile native tokens, or allow their employ while imposing risk mitigation measures such as business continuity plans, fallback chains, and minimum economic security standards and validators.
