The Financial institution of Italy has modeled what would occur to Ethereum's safety and funds capability if its worth drops to zero, treating the community as crucial monetary infrastructure somewhat than only a speculative crypto asset.
In a brand new analysis paper titled “What occurs when Ether goes to zero? How market threat in cryptocurrencies turns into infrastructure threat,” Financial institution of Italy economist Claudia Biancotti examines how excessive worth shocks in Ether (ETH) might affect Ethereum-based monetary providers that depend on the community for transaction processing and settlement.
Biancotti focuses on the connection between the financial incentives of validators and the steadiness of the underlying blockchains utilized in stablecoins and different tokenized belongings.
On this paper, we mannequin how validators who obtain rewards in ETH will react if the value of the token collapses and the reward loses adequate worth.
In that situation, among the validators might moderately be terminated, Biancotti argues, which would scale back the entire stake securing the community, sluggish block technology, and weaken Ethereum's means to face up to sure assaults and assure well timed closing transaction settlement.
When ETH worth threat turns into infrastructure threat
Somewhat than treating Ether as a purely unstable funding, this examine positions it as a core enter to fee infrastructures utilized by a rising share of on-chain monetary exercise.
Associated: Stablecoin dangers seem like minimal in Europe, with low penetration and MiCA: ECB
Biancotti argues that Ethereum is more and more used as a fee layer for monetary merchandise, and a shock to the worth of the native token might affect the reliability of the underlying infrastructure.
What would occur if the ether turned zero? Supply: financial institution of italy
This framework permits the Financial institution of Italy to trace how the market threat of the bottom token evolves into the operational and infrastructure threat of the merchandise constructed on prime of it, from fiat-backed stablecoins to tokenized securities that depend on Ethereum for transaction ordering and finality.
Beneath such stress, the paper emphasizes, disruptions is probably not restricted to speculative buying and selling, however can also spill over into fee and funds use instances, that are underneath elevated scrutiny from regulators.
Associated: IMF units tips to handle stablecoin dangers past regulation
ECB warns about stablecoin spillovers
Different authorities, together with the Worldwide Financial Fund and the European Central Financial institution (ECB), have warned that giant stablecoins might turn into systemically vital and pose monetary stability dangers in the event that they proceed to develop quickly and stay concentrated in a small variety of issuers.
The ECB Monetary Stability Evaluation Report, revealed in November 2025, famous that as a result of structural weaknesses of stablecoins and their affiliation with conventional finance, extreme shocks might trigger financial institution runs, asset dumps (the fast sale of reserve belongings at depressed costs to fulfill redemptions), and deposit outflows, particularly if adoption spreads past crypto buying and selling.
The Financial institution of Italy has concluded that regulators face tough trade-offs on whether or not and the way supervised intermediaries needs to be allowed to depend on public blockchains for monetary providers.
It exhibits two choices. As a result of present public chains depend on unstable native tokens, they will both be handled as unsuitable to be used in regulated monetary infrastructure, or their use may be allowed whereas imposing threat mitigation measures resembling enterprise continuity plans, contingency chains, and minimal requirements for financial safety and validators.
