Bank of Italy models Ethereum infrastructure risks in an ETH price collapse scenario

The Bank of Italy has projected that Ethereum faces infrastructure risks if the crypto asset drops to zero. The bank issued a report highlighting that some validators would exit the ecosystem, thereby reducing the total supply of ETH, securing the network.

Bank of Italy economist Claudia Biancotti has raised concerns over Ethereum’s infrastructure if the ETH price were to collapse to zero. The economist published a report titled ‘What if Ether Goes to Zero? How Market Risk Becomes Infrastructure Risk in Crypto,” pointed out that if ETH collapsed to zero, it would jeopardize its security and limit its transaction processing capacity. 

Ethereum’s price collapse could impact stablecoins

The bank’s report noted that Ethereum was a financial infrastructure rather than a speculative digital currency. The Ethereum network relies on validators to power its economic and financial ecosystem, who receive financial incentives in ETH for running the blockchain.

Biancotti analyzed the existing link between the stability of Ethereum as a self-sustaining infrastructure that powers tokenized assets and the incentives validators receive for managing the blockchain.    

According to Biancotti’s report, some validators would bail out of the ecosystem, causing a reduction in the total stake of ETH used to approve transactions. The validator exit would then lead to low block production and weaken Ethereum’s security against attacks.

Biancotti argues in the report that Ethereum is increasingly utilizing the network as a settlement layer for financial instruments, which means that volatility on the blockchain could compromise the ecosystem’s reliability. The report also identified potential risks on instruments built on top of Ethereum when volatility becomes an issue. 

These assets include tokenized securities and stablecoins that rely on Ethereum to reach transaction finality. The report also identified potential risks that could spill over into payment and settlement use cases that regulators increasingly monitor, especially with bridges linking traditional finance with the decentralized ecosystem.

A previous Cryptopolitan report, dated July 29, 2025, noted that Equity research and brokerage firm Bernstein flagged unique risks facing Ethereum treasuries. According to the report, these treasuries are facing risks associated with smart contracts and liquidity constraints.

The report by the Bank of Italy emphasized that authorities and lawmakers face a dilemma regarding whether and how supervised intermediaries should be permitted to rely solely on public blockchains to power financial transactions.

The bank suggested that stablecoins and the underlying blockchain technology should be considered unsuitable for facilitating transactions in a regulated environment or deployed for use with proper risk mitigation strategies, such as business continuity plans and contingency plans.

European Central Bank calls for tightened stablecoin regulations

The Monetary Fund and the European Central Bank cautioned about Stablecoin risks in the Financial Stability Review dated November 2025. The report outlined that stablecoins pose financial stability risks, especially if they continue to expand and accumulate in a small group of users. The review also noted that the shrinking bridge between traditional finance and decentralized infrastructures implies that a severe shock to stablecoins could trigger deposit outflows, runs, and asset fire sales.

The study comes amid growing global demand for stablecoin usage among retail and institutional investors. A previous cryptopolitan report highlighted that stablecoin supply has expanded significantly in recent times. The report noted that Ethereum-based stablecoins reached record turnover in 2025. The report noted that 2025 saw remarkable growth in stablecoin usage, with over 593K daily active addresses moving stablecoins.

Meanwhile, Cryptopolitan reported that stablecoin activity in Europe surged last year despite tightened regulations. The report referenced data from Artemis, a stablecoin analytics platform, which indicated that transactions in the Eurozone in 2025 exceeded 100 million. Additional data from the platform shows that the number of unique stablecoin active addresses sits at an all-time high of 46.2 million.

The smartest crypto minds already read our newsletter. Want in? Join them.