The Central Bank of Italy (Banca d'Italia ) recently published a research report titled "What if Ether Goes to Zero? How Market Risk Becomes Infrastructure Risk in Crypto." This report simulates the extreme scenario of the Ethereum (ETH) price falling to zero to explore the potential impact on Ethereum network security and transaction settlement capabilities.
The report, authored by Claudia Biancotti, an economist at the Central Bank of Italy, is part of the "Markets, Infrastructure and Payment Systems" (Mercati, infrastrutture, sistemi di pagamento, MISP n. 74) series and is considered one of the most closely watched central bank-level stress test analyses in the cryptocurrency space recently.
The report's core argument is that Ethereum should be viewed as a critical financial infrastructure, rather than simply a speculative asset, and it explores the potential risks to the entire network and on-chain financial ecosystem should the price of the native token ETH plummet to near zero.
Validators and Network Risks in Extreme Situations
As is well known, Ethereum uses the Proof of Stake (PoS) consensus mechanism, where validators must stake ETH to participate in accounting and receive rewards. The report points out that if the price of ETH crashes, the economic returns from staking will be almost zero, and many validators will rationally unstake, leading to a significant decrease in the total amount staked across the network.
This would drastically reduce Ethereum's "economic security budget" (the minimum cost required to successfully attack the network). The report notes that, at the time of the study, this budget was approximately 17 million ETH, worth over $71 billion. With reduced staking, the network would be more vulnerable to 51% attacks or other disruptive activities.
How market risk evolves into infrastructure risk
The report states bluntly that a large-scale withdrawal of validators will have negative ripple effects:
- Block generation speed decreased
- Transaction confirmation time extended
- Decreased final settlement capability
These changes will further and directly impact financial services that rely on Ethereum for settlement, including:
- Decentralized Finance (DeFi) Protocols
- Stablecoin system
- Institutional-grade tokenized assets (RWA)
- Layer 2 network
The report points out that, in this way, the price volatility of ETH, which was originally considered a "market risk," could eventually evolve into systemic infrastructure and financial stability risks—risks that are not limited to speculative trading but could affect the reliability of Ethereum as a settlement infrastructure. This is because an increasing number of financial instruments, including stablecoins and tokenized securities, rely on Ethereum for transaction sorting and final settlement; therefore, ETH's market volatility could translate into operational and infrastructure risks.
Warning from European regulators
The study also cautions that regulators need to carefully consider the risks of using public blockchains in financial services. Both the International Monetary Fund (IMF) and the European Central Bank (ECB) have warned that large stablecoins, if they expand rapidly and become highly concentrated in the hands of a few issuers, could become systemically important tools. In the event of price or structural shocks, this could trigger runs on funds, asset sell-offs, and outflows of deposits.
The Italian central bank has proposed two policy options: one is to believe that existing public blockchains are not suitable as regulated financial infrastructure; the other is to allow their use, but with supporting risk mitigation measures, including business continuity plans, backup chains, and minimum standards for validators and economic security.
The research report emphasizes that as the crypto finance ecosystem expands, regulators are facing the challenge of striking a balance between innovation and financial stability.
Background and Global Significance of the Report
Biancotti's research points to a critical juncture in 2025-2026, a period of accelerated institutionalization in the crypto market. Crypto regulations in the US and elsewhere are becoming clearer, crypto ETFs are continuing to develop, and many institutions are beginning to view public blockchain settlement as a key financial infrastructure. Simultaneously, stablecoins, tokenized assets, and traditional finance are becoming increasingly intertwined.
The Central Bank of Italy used the scenario of "ETH going to zero" as an extreme tail risk to remind regulators and market participants that the price of native crypto tokens is no longer just a matter of speculation, but may affect the stability of the entire on-chain financial ecosystem.
