The Bank of Italy has modeled an extreme scenario in which ETH falls to zero, and the conclusion goes beyond price damage. The paper argues that a collapse in Ether could weaken Ethereum’s validator base, reduce on-chain security, and spill into the financial services that rely on the network for settlement, including stablecoins, DeFi, tokenized assets, and Layer 2 systems.
The study, titled What if Ether Goes to Zero? How Market Risk Becomes Infrastructure Risk in Crypto, was written by Bank of Italy economist Claudia Biancotti as part of the central bank’s “markets, infrastructures and payment systems” series. Its main premise is clear: Ethereum should not be assessed only as a speculative asset. It also needs to be examined as financial infrastructure, especially as more activity is built on top of it.
Validator exits could shrink Ethereum’s security budget
Because Ethereum runs on Proof of Stake, validators must lock up ETH to participate in block production and earn rewards. The paper says that if Ether’s price collapses, the economic incentive to stake would almost disappear, making validator exits a rational response. That would leave the network with a much smaller economic shield.
According to the report, Ethereum’s economic security budget stood at about 17 million ETH at the time of the research, worth more than $71 billion. That figure reflects the minimum cost required to carry out a successful attack on the network. If staking levels drop sharply, the cost of a 51% attack or similar disruptive action would also fall. The market shock would not stay in the market.
Settlement reliability becomes the central concern
The report says a broad validator withdrawal could slow block production, extend transaction confirmation times, and weaken final settlement on Ethereum. This is where the analysis shifts. The issue is no longer just the price of ETH, but whether the chain can keep functioning as a dependable settlement layer for financial activity.
That matters because more crypto-native and institution-facing services depend on Ethereum for transaction ordering and settlement. In that setup, market risk tied to ETH can turn into operational and infrastructure risk. The paper specifically points to DeFi protocols, stablecoin systems, institutional tokenized assets, and Layer 2 networks as areas that could face direct stress if Ethereum’s core reliability deteriorates.
Policy choices center on limits and safeguards
The study also references earlier warnings from the International Monetary Fund and the European Central Bank on large stablecoins, especially where issuance is concentrated among a small number of players. In a stressed scenario, those structures could face runs, asset sales, and deposit outflows.
Against that backdrop, the Bank of Italy lays out two policy options. One is to conclude that current public blockchains are not suitable as regulated financial infrastructure. The other is to allow their use, but only with risk controls such as business continuity plans, backup chains, and minimum standards for validator participation and economic security.
The paper frames ETH price collapse as a tail-risk scenario, but its broader point is about dependence. As stablecoins and tokenized assets become more connected to traditional finance, volatility in a blockchain’s native token can become a question of infrastructure resilience, not just market pricing.