Bank of Italy Warns: Ethereum Price Collapse Could Threaten Network Security
Central banks are starting to sweat the small stuff—or in this case, the multi-billion-dollar stuff. The Bank of Italy just fired a shot across the bow of the crypto world, highlighting a critical vulnerability most hodlers prefer to ignore.
The Fee-Fi-Fo-Fum Problem
Ethereum's security doesn't run on hopes and dreams. It runs on ETH. Validators stake the cryptocurrency to secure the network and earn rewards—rewards paid in, you guessed it, more ETH. It's a beautiful, self-reinforcing loop... until the price tanks. A severe and sustained price collapse could slash the real-dollar value of those rewards. Why risk expensive hardware and energy for pennies on the dollar? Validator participation could drop, leaving the network slower and more vulnerable to attack. It's the crypto equivalent of cutting the police budget during a crime wave.
Beyond the Fear, a Functioning Market
Let's not pretend the smart money hasn't priced this in. The market is a brutal, real-time stress test. A price crash would be agonizing, but it would also be a legendary fire sale for believers. New validators could jump in at lower entry costs, potentially re-stabilizing the network from the ashes. It's Darwinism with a digital wallet—only the most efficient and committed survive.
The Real Warning Isn't About Price
The Bank of Italy's memo isn't really a price prediction. It's a stark reminder that in decentralized systems, economics and security are fused at the hip. You can't have one without the other. A 'secure' network that nobody can afford to secure is just a very expensive database. This is the tightrope every proof-of-stake chain walks, a perpetual balance between token value and network integrity.
So, while traditional finance tut-tuts about volatility, the rest of us see a market doing exactly what it's supposed to do: finding the true cost of security through sheer, unadulterated chaos. Sometimes, that looks like an all-time high. Sometimes, it looks like a collapse. The network's job is to withstand both. The irony? The warning itself might be the most bullish signal of all—it means they're finally paying attention.
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.
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