Bank of Italy models in stress testing from ether to zero condition
The Bank of Italy has mapped out what would happen to Ethereum's security and settlement capacity if the price of Ether were to fall to zero, viewing the network as a critical financial infrastructure, not just a speculative crypto asset.
In a new research paper titled “What if Ether Goes to Zero? How Market Risk Becomes an Infrastructure Risk in Crypto,” Bank of Italy economist Claudia Biancotti examines how a major price shock in Ether (ETH) could affect Ethereum-based financial services that rely on the network for transaction processing and settlement.
Biancotti focused on the relationship between the economic incentives of validators and the stability of the underlying blockchain used by stablecoins and other tokenized assets.
The paper models how validators who are rewarded in ETH might react if the token's price falls and their rewards lose value.
In that case, some portion of the authentication would logically be released, Biancotti argues, which would reduce the overall security of the network, delay production and weaken Ethereum's ability to withstand some attacks and ensure the timely and final settlement of transactions.
When the ETH price risk becomes an infrastructure risk
Rather than viewing Ether as just a volatile investment, the study envisions the growing onchain financial movement as a primary resource in the used settlement infrastructure.
Related: Stablecoin at low adoption and MICA: ECB
Biancotti argues that Ethereum is increasingly being used as a settlement for financial instruments, so that shocks to the value of the native token can reduce the reliability of the underlying infrastructure.
This framework allows the Bank of Italy to track the market risk in the underlying token to the operational and infrastructure risk of the devices built on top of it, from fiat-backed stablecoins to cryptographic records that rely on Ethereum for transaction order and finalization.
The paper emphasizes that, amid such stress, disruptions are not limited to speculative trading, but may also spill over into payment and settlement issues, where regulators have greater oversight.
Related: IMF Issues Guidelines to Address Stablecoin Risks Beyond Regulations
ECB warnings on stablecoin spillovers
Other authorities, including the International Monetary Fund and the European Central Bank (ECB), have warned that large stablecoins could become systemically important and pose risks to financial stability if they continue to expand rapidly and accumulate in a few issuers.
In the year The ECB's Financial Stability Review report, published in November 2025, says stablecoins' structural vulnerabilities and their relationship with traditional finance mean a severe panic run, asset fire sales (rapid selling at depressed prices) and spending, especially if adoption expands beyond crypto trading.
Bank of Italy regulators have concluded that they face a tough trade-off over whether regulated intermediaries should be allowed to rely on public blockchains for financial services.
It outlines two options: allow today's public chains to be unsuitable for use in integrated financial infrastructures because they rely on volatile native tokens, or allow them to be used while implementing risk mitigation measures such as business continuity plans, emergency chains, and minimal economic security and authentication levels.
