European policymakers are starting to look at Ethereum through a very different lens. Instead of debating price volatility or speculative excess, a new study asks what happens if the blockchain itself becomes unreliable - not because of bugs or hacks, but because its economic engine stops working.
That question sits at the heart of a recent paper published by the Bank of Italy, which treats Ethereum as financial infrastructure rather than a crypto market curiosity.
Key Takeaways
The Bank of Italy treats Ethereum as financial infrastructure rather than a speculative crypto asset.
A collapse in ETH’s price could weaken validator incentives and disrupt settlement reliability.
Regulators face a trade-off between restricting public blockchains or allowing them with added safeguards.
Ethereum’s design relies on a simple incentive loop: validators lock up capital and receive rewards paid in ETH for keeping the network running. As long as ETH holds value, the system remains economically attractive. The Bank of Italy’s research deliberately breaks that assumption.
In an extreme stress scenario where Ether’s price collapses entirely, those rewards lose their meaning. The paper argues that rational validators would not continue operating at scale under such conditions, because the cost of participation would outweigh the benefits.
Network Effects of a Validator Exit
Once validator participation drops, the consequences compound quickly. A shrinking stake base weakens Ethereum’s defenses, slows transaction processing, and undermines the guarantees of final settlement that financial applications depend on.
The key insight is that this damage would not be limited to crypto trading. Any service using Ethereum as a settlement layer — from stablecoins to tokenized securities — would feel the impact, even if those assets were otherwise fully backed and compliant.
Ether Is Not Just an Asset Anymore
The study’s most significant shift is conceptual. Ether is framed not as an investment, but as an operational input. Its market value becomes directly linked to Ethereum’s ability to function as a settlement network.
As onchain finance grows, that link tightens. A shock to ETH’s price no longer stays within markets; it can spill into payment flows, clearing mechanisms, and financial contracts that rely on Ethereum’s uptime and finality.
Why Central Banks Are Paying Attention
This perspective aligns with broader warnings from institutions like the International Monetary Fund and the European Central Bank, which have flagged stablecoins as potential sources of systemic risk if adoption accelerates.
An ECB financial stability review published in late 2025 highlighted how concentrated stablecoin issuers and their links to traditional finance could amplify shocks through runs, forced asset sales, and liquidity stress. The Bank of Italy’s paper extends that logic down one layer — to the blockchain those instruments rely on.
A Regulatory Fork in the Road
The research stops short of calling for bans, but it outlines an uncomfortable choice for regulators. One option is to deem public blockchains unsuitable for regulated financial use because they depend on volatile native tokens. The other is to accept their role, but impose safeguards.
Those safeguards could include contingency settlement systems, minimum standards for validator participation, and business-continuity planning designed to withstand severe market stress. Either path would mark a major shift in how public blockchains are treated by supervisors.
Why the Scenario Matters Even If It Never Happens
The Bank of Italy is not predicting Ether’s collapse. Instead, it is using an extreme case to reveal hidden dependencies that already exist. As Ethereum becomes embedded in financial workflows, its resilience can no longer be evaluated separately from the value of its native token.
The broader message is clear: once blockchains move from experimentation to infrastructure, their economic assumptions become matters of financial stability. At that point, price risk stops being just a market issue — and starts looking a lot like systemic risk.
