Claudia on the critical threat: how the collapse of Ethereum could destroy the global financial system

Economist of the Bank of Italy, Claudia Biancotti, issued a warning about the future of the largest smart contract platform. In her new research, she considers a scenario previously deemed unlikely: what happens to the global financial system if the value of Ethereum drops to a critical minimum. This is not just an academic exercise — it’s a warning about how the cryptocurrency network has transformed from a marginal project into a critical infrastructure upon which modern financial systems depend.

Claudia’s research joins an increasingly growing catalog of warnings from international financial institutions about systemic risks associated with decentralized networks. Currently, ETH is trading at around $2.32K, but experts warn of potential consequences even from minor fluctuations in the token’s value for global financial stability.

Claudia’s Research: Why a Drop in ETH Threatens Validators and Network Security

Claudia Biancotti focused on a critical detail often overlooked in discussions around Ethereum. The network operates on a proof-of-stake principle, where validators (network participants supporting its operation) earn rewards in ETH tokens. This means that the security economy of the network directly depends on the token’s value.

What happens if Ether loses a significant portion of its value? According to Claudia, the answer is simple and frightening: validators, who no longer have incentives to stay in the network due to low rewards, will start to exit en masse. These will not be irrational decisions — it will be a fully justified economic reaction to unfavorable conditions.

The result of such a scenario would be a sharp destabilization of the mechanism that ensures Ethereum’s security. The amount of ETH staked to support the network (the so-called “stake”) would decrease, block production would slow down, and the network would become vulnerable to attacks. It is precisely during the greatest crisis, when users would critically need to rely on the system’s reliability, that Ethereum would become most exposed.

From Market Risk to Systemic Crisis: How Ethereum Became Critical Financial Infrastructure

Claudia’s research introduces an important distinction that reorients the entire discourse around Ethereum. Previously, the cryptocurrency network was mainly viewed as an object of speculative investment, similar to any altcoin or startup token. However, the picture has fundamentally changed.

Ethereum is no longer just a platform for trading digital assets. It has become a settlement layer for critically important financial services. Large reserves of stablecoins (cryptocurrencies pegged to fiat value), tokenized securities, blockchain-based lending systems, and other financial instruments operating on the network indirectly influence the traditional financial system.

Claudia describes this process as a shift from market risk to infrastructural risk. If previously a decline in ETH mainly affected those holding the asset, now a collapse of Ethereum could trigger a cascade effect across a range of financial services. Stablecoin users, digital asset managers, and companies built on decentralized settlement systems could all find themselves in danger simultaneously.

Stablecoins, Blockchain Settlements, and the Regulatory Dilemma

The research provides concrete examples of applications that have transformed Ethereum from an experimental network into a critical element of financial infrastructure. Payment systems, settlement networks, and tokenized financial instruments increasingly rely on decentralized networks to organize transactions and verify ownership of assets.

The Euro Central Bank and the International Monetary Fund have already issued warnings that large stablecoins, especially those issued by concentrated issuers, could become systemically important. If their issuance remains concentrated among a few players and their links to the traditional financial system deepen, even a small shock could trigger panic withdrawals and forced asset sales.

Claudia explains that at this point, monopolies of traditional regulators face the reality of a decentralized financial system. They cannot simply shut down the network. Ethereum is already too deeply integrated into the financial ecosystem.

Between Bans and Precautionary Measures: How Governments Plan to Protect Financial Stability

Based on Claudia’s conclusions, a complex choice emerges for regulators worldwide. The first option seems simplest: declare public blockchains like Ethereum unsuitable for use in regulated financial services. The problem is, this path is already closed. Too much private capital and government initiatives have already been invested in integrating blockchain into the financial system.

The second option is to allow usage but under strict supervision and with the implementation of various safeguards. This could involve developing contingency plans, backup settlement systems that can take over in a crisis, and establishing minimum standards of economic security for networks serving regulated financial services.

Claudia’s research signals a fundamental reevaluation of how regulators view cryptocurrency networks. Ethereum’s tokenomics is no longer just a matter for the crypto industry; it’s a matter of the stability of the entire global financial system.