The Bank of Italy has made a technical analysis that asks a serious question: What happens if Ethereum (ETH) falls to zero and stays there?
A recently released paper was authored by Claudia Biancotti in the Markets, Infrastructure, and Banking Payment Systems series. It is listed as Number 74 and has 11 pages.
Bank Of Italy Releases Technical Analysis
According to the Bank, permissionless blockchains like Ethereum serve as multi-token settlement systems and contracts. The agency considers this question to be an assessment of pressure on infrastructure rather than just commodity prices.
The note warns that if the native token loses most of its market value and the decline persists, the economic incentives that keep validators running could disappear. Validators may come out, the paper says, and that can make repairs slow or stop.
Source: Bank of Italy
Findings of the Paper
Based on the reports in the Bank’s paper, the series of results is both simple and worrying. Warrants are paid in ETH. If ETH has no value, that payment no longer incentivizes operators.
As a result, payment of transactions can be very slow or, in extreme cases, stopped. The paper also highlights that some assets that use the chain – for example, securities with tokens or fully backed stablecoins – can be difficult to transfer or can face security problems if the network’s defenses are weakened.
Ethereum: Context and Reaction
Italy’s broader regulators have recently stepped up their scrutiny of crypto risks. Reports indicate that the Ministry of Economy has ordered a review of safeguards, and the Bank of Italy’s paper taps into that broader push to measure the risks associated with new payment systems.
Reuters and other outlets filed regulatory reviews in December and January as authorities pressed firms to meet emerging regulations.
Potential Risks of the System
The authors do not say that this situation is possible. Instead, the work is designed as a way to show how market risk can become infrastructure risk. The paper points out that there is no formal way to “shut down” an illicit chain in a systematic way.
Any reduction will depend on voluntary action by insurers, large firms, or protocol changes that are proposed and accepted by the public. That uncertainty is a major policy concern.
The Bank of Italy note is a technical, limited appearance in the worst condition. It uses concrete data to argue that the collapse of the Ethereum market value will not only hit the owners but may disrupt the functionality of the systems currently running on Ethereum.
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