Bank of Italy analyzes an Ethereum 'zero scenario'…risk could spill over to infrastructure
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Summary
- The Bank of Italy said it found that, in a zero scenario in which Ethereum (ETH) falls to 0, risk could spill over across the broader financial infrastructure.
- The report said that if validator exits, a decline in total staking, and slower block production occur, they could directly disrupt on-chain payment and settlement functions.
- The report said it presented two regulatory options: viewing public blockchains that rely on volatile tokens as unsuitable for regulated financial infrastructure, or allowing their use while imposing minimum standards for emergency response frameworks, alternative payment rails, and validator security.
The Bank of Italy analyzed the impact on network security and payment functions under an assumption that Ethereum (ETH) prices collapse to an extreme. The assessment says the risk could spill over beyond mere asset-price swings to the stability of the broader financial infrastructure.
According to Cointelegraph, a cryptoasset (cryptocurrency) specialist media outlet, on the 12th the Bank of Italy presented this scenario in a research report titled “If the price of Ethereum goes to zero: how market risk turns into crypto-infrastructure risk.”
The report defines Ethereum not as a speculative asset but as core infrastructure responsible for transaction processing and settlement for stablecoins and tokenized assets. In particular, it focuses on the fact that validators depend on Ethereum rewards, and finds that if prices plunge, weakened economic incentives could lead some validators to leave the network.
According to the report, if validators exit, the total amount of staking that protects the network would decline, block production would slow, and resistance to attacks as well as assurances of rapid transaction finality could weaken. This could cause direct disruptions to on-chain payment and settlement functions.
Through this approach, the Bank of Italy traced how Ethereum’s price risk can transform into operational and infrastructure risk. It noted that for financial products that rely on the Ethereum network—such as fiat-pegged stablecoins or tokenized securities—the shock could spread beyond speculative trading into the payments and settlement domain.
The report explained that “as the share of Ethereum being used as the settlement layer for financial products grows, shocks to the value of the base token can be directly linked to the reliability of the infrastructure.” Accordingly, it said the risk perimeter monitored by regulators is expanding beyond trading markets to the overall payment system.
The Bank of Italy therefore presented two regulatory options. One is to deem public blockchains that rely on highly volatile tokens unsuitable as regulated financial infrastructure; the other is to allow their use but impose minimum standards for emergency response frameworks, alternative payment rails, and validator security.
