A collapse within the worth of Ethereum might destroy the blockchain’s potential to settle transactions and freeze greater than $800 billion in property, a Financial institution of Italy analysis paper warns.
The paper, written by Claudia Biancotti from the central financial institution’s Data Know-how Directorate, outlined a contagion situation during which ETH’s worth collapse degrades the blockchain’s safety infrastructure to the purpose of failure.
Such a failure would ensnare and jeopardize the tokenized shares, bonds, and stablecoins that enormous monetary establishments are more and more inserting on public ledgers, the report argues.
Basically, this paper questions the belief that regulated property issued on public blockchains are insulated from the volatility of the underlying cryptocurrency.
In accordance with the report, the trustworthiness of the fee layer in permissionless networks like Ethereum is carefully tied to the market worth of unbacked tokens.
The lure of validator economics
The central argument of this paper relies on the basic variations between conventional monetary market infrastructure and permissionless blockchains.
In conventional finance, fee methods are operated by regulated establishments with formal supervision, capital necessities, and a central financial institution backstop. These entities are paid in fiat foreign money to make sure that the transaction is legally and technically accomplished.
In distinction, the Ethereum community depends on a decentralized workforce of “verifiers.” These are unbiased operators that validate and full transactions.
Nevertheless, they don’t seem to be legally required to supply providers to the monetary system. Due to this fact, they’re motivated by revenue.
Validators incur actual prices when it comes to {hardware}, web connectivity, and cybersecurity. Nevertheless, their revenues are primarily denominated in ETH.
The paper notes that even when staking yields are secure in token phrases, a “vital and sustained” decline within the greenback worth of ETH might wipe out the real-world worth of the proceeds.
If the income generated from validating transactions is lower than the price of working the tools, a rational enterprise will exit of enterprise.
The paper describes a possible “downward worth spiral with persistent adverse expectations” during which stakeholders rush to promote their holdings to keep away from additional losses.
Promoting staked ETH requires “de-staking,” which successfully deactivates the validator. The report warns that in excessive restriction eventualities, “no validators means the community will fail.”
In such a scenario, the fee layer turns into successfully non-functional, permitting customers to submit transactions that won’t be processed. Due to this fact, property residing on-chain grow to be “immovable” no matter off-chain creditworthiness.
When your safety price range reaches its restrict
Nevertheless, this risk extends past a easy processing outage. The paper argues that worth collapse considerably reduces the price for a malicious attacker to take over a community.
This vulnerability is framed by the idea of an “financial safety price range,” outlined because the minimal funding required to achieve sufficient stake on a community to mount a sustained assault.
Ethereum permits attackers to govern the consensus mechanism by controlling over 50% of the energetic verification energy. This case permits for double spending and censorship of sure transactions.
The paper estimates that as of September 2025, Ethereum’s financial safety price range is roughly 17 million ETH, or roughly $71 billion. Beneath regular market circumstances, this excessive price makes an assault “not possible”, the authors say.
Nevertheless, safety budgets aren’t static. It fluctuates relying in the marketplace worth of the token. When the value of ETH collapses, the greenback price of disrupting the community additionally falls.
On the identical time, as trustworthy validators exit the market to chop their losses, the entire pool of energetic stakes shrinks, additional reducing the brink for attackers to achieve majority management.
This paper outlines the perverse and inverse relationship. As the worth of a community’s native token approaches zero, the price of attacking the infrastructure drops sharply, however the presence of different priceless property might enhance the inducement to assault the infrastructure.
The “protected” asset lure
This dynamic poses explicit dangers to the proliferation of “actual world” property (RWA) and stablecoins on the Ethereum community.
As of late 2025, Ethereum hosts greater than 1.7 million property with a complete capitalization of greater than $800 billion. This determine contains the mixed market capitalization of the 2 largest dollar-backed stablecoins, roughly $140 billion.
In a situation the place ETH loses virtually all of its worth, the token itself can be of little curiosity to a complicated attacker.
Nevertheless, the infrastructure will nonetheless maintain billions of {dollars} of tokenized Treasury payments, company bonds, and fiat-backed stablecoins.
The report claims that these property would be the main targets. If an attacker positive factors management of a weakened chain, they might theoretically double-spend these tokens by sending them to an trade to promote for fiat foreign money, whereas additionally sending them to a different pockets on the chain.
This has a direct impression on the normal monetary system.
If issuers, broker-dealers, or funds have a authorized obligation to redeem these tokenized property at face worth, however on-chain possession data are compromised or manipulated, monetary stress shifts from the crypto market to real-world stability sheets.
With this in thoughts, the newspaper warns that the harm will not be restricted to speculative crypto merchants, “particularly if the issuer has a authorized obligation to refund at face worth.”
There aren’t any emergency exits
In conventional monetary crises, panic usually causes a “flight to security”, with individuals transferring their funds from misery to secure places. Nevertheless, such a transition will not be potential within the occasion of blockchain infrastructure collapse.
For buyers holding property tokenized on the failed Ethereum community, a flight to security might imply transferring these property to a different blockchain. Nevertheless, this poses a significant impediment to this “infrastructure change.”
First, cross-chain bridges, the protocols used to maneuver property between blockchains, are notoriously weak to hacking and should not scale properly sufficient to deal with mass outflows in occasions of panic.
These bridges may very well be uncovered to assaults, and additional uncertainty might result in property being “speculated” and “weak stablecoins” being unpegged.
Second, the decentralized nature of the ecosystem makes coordination troublesome. Not like centralized inventory exchanges that may halt buying and selling to quell panic, Ethereum is a world system with conflicting incentives.
Third, a good portion of your property could also be locked up in DeFi protocols.
In accordance with information from DeFiLlama, roughly $85 billion is locked in DeFi contracts on the time of writing, with many of those protocols performing as automated asset managers with governance processes that can’t instantly reply to failures within the settlement layer.
Moreover, the paper emphasizes that there isn’t a “lender of final resort” within the cryptocurrency ecosystem.
Ethereum has built-in mechanisms to gradual validator exits, limiting processing to roughly 3,600 exits per day, however this can be a technical throttle, not an financial backstop.
The writer additionally rejected the concept that deep-pocketed entities like exchanges might stabilize collapsing ETH costs by means of “bulk purchases,” saying it was “not possible to work” in a real disaster of confidence, the place the market might assault the rescue fund itself.
regulatory dilemma
The Financial institution of Italy’s paper in the end positions this contagion danger as a urgent coverage concern: Ought to permissionless blockchains be handled as important monetary market infrastructure?
The authors word that whereas some corporations choose permissioned blockchains operated by licensed events, the enchantment of public chains stays sturdy as a result of their attain and interoperability.
The paper cites the BlackRock BUIDL Fund, a tokenized cash market fund obtainable on Ethereum and Solana, as a chief instance of early-stage conventional monetary exercise on public rail.
Nevertheless, the evaluation means that this infrastructure import comes with distinctive dangers in that “the well being of the fee layer is tied to the market worth of speculative tokens.”
The paper concludes that central banks “can’t be anticipated” to jack up the costs of privately issued native tokens simply to make sure the safety of fee infrastructure. As an alternative, it means that regulators might have to impose strict enterprise continuity necessities on issuers of the underlying property.
Essentially the most particular proposal within the doc requires issuers to keep up an off-chain possession database and specify a pre-selected “contingency chain.” This may theoretically enable property to be ported to a brand new community within the occasion of a failure of the underlying Ethereum layer.
The newspaper warns that with out such safeguards, the monetary system dangers slipping right into a sleepwalking situation during which legit monetary plumbing shuts down as a result of collapse of speculative crypto property.
