Solana is positioning itself as the settlement layer for institutional finance. In the current bear market, that ambition raises a question that bank risk managers need to answer and that the crypto world has not fully addressed: how much does the price of SOL matter for the operational reliability of the network it powers?

The Question

A novel risk that existing frameworks do not capture

Traditional financial infrastructure is operationally independent of its own market value. SWIFT’s payment rails do not become less reliable when SWIFT’s balance sheet deteriorates and it would not occur to anyone that it should be otherwise. But it is not true for proof-of-stake blockchain networks.

On these systems, the market price of their native cryptocurrency connects to validator economics, staking dynamics, and network security in ways that have no direct analogue in traditional infrastructure. A bank risk manager evaluating a blockchain protocol — whether for use as a trading, settlement, payment or asset holding infrastructure — therefore has an added dimension to consider.

This piece examines that dimension from a risk manager’s perspective. It identifies two specific channels through which price dynamics affect institutional participation, assesses how significant those channels actually are, and attempts to frame the open analytical questions that would reinforce a comprehensive risk-management framework.

Channel One: Regulatory Capital

Price volatility and regulatory constraints on institutional participation

The first transmission mechanism is regulatory. The Basel Committee on Banking Supervision’s (BCBS) prudential standard for cryptoasset exposures (SCO60), in force from 1 January 2026 in certain jurisdictions¹, subjects unbacked crypto tokens to a 1,250% risk weight under its Group 2b classification. A 1,250% risk weight is designed to work with an 8% capital requirement so that cryptocurrencies on a bank’s balance sheet are backed 1:1 with tier 1 capital — calibrated to reflect extreme price volatility and the absence of a tractable fundamental valuation framework.

The consequence is that any bank participation in crypto becomes prohibitively capital-intensive. This includes not only speculative positioning but operational activities such as holding SOL as a fee reserve for settlement operations, participating in DeFi collateral markets, and most directly, acting as a validator. A bank validator on Solana must hold staked SOL and the cost of the equity backing this position is likely to exceed any conceivable yield on the stake. The 1,250% weight is therefore not merely a constraint on investment — it is a structural barrier to institutional participation.

That barrier matters in both directions. For the network, institutional validators bring committed long-term capital — important to ensure that stake value grows in line with business value as the network grows — operational discipline, and a reputational boost proportionate to their brand and gravitas. An institution that publicly participates in Solana’s validator set has made a credible, visible commitment to the ecosystem. For the institution, validation offers fee income, but more importantly puts them at the heart of protocol operations with the opportunity to earn block leader privileges and gain first look at block data, which has genuine information value for a market participant operating across asset classes that are increasingly settling on-chain.

But what has this to do with price? A significant part of the rationale for the 1,250% charge is the volatility of “unbacked” assets. This characterisation may be unfair: tokens have real economic utility, not least in the role they play in network security, and the BCBS is conducting a targeted review of SCO60 in 2026 after major financial trade associations submitted a formal letter arguing for recalibration. However, the case for recalibration is greatly strengthened by demonstrating that currencies such as SOL have a credible fundamental value anchor, a long-term path to stability and a quantifiable operational risk profile. Fortunately for Solana, volatility in the price of SOL is on a demonstrably downward trajectory already: from 113% in the year to July 2023 to 52% over the last 90 days. Nevertheless, institutional support for that path would only strengthen the story.

Price stability matters for institutional participation through two distinct channels: it determines validator economics directly, and it determines the regulatory capital cost of any SOL balance sheet exposure. Both channels are active simultaneously in a bear market.

Channel Two: Validator Economics

How token price connects to network security

The second transmission mechanism runs through validator economics. Validators — the nodes that process transactions, produce blocks, and maintain consensus — must stake native tokens to secure a seat at the table. In return, they earn revenue from multiple sources: transaction fees, a share of MEV, and protocol-determined issuance rewards². Rewards are denominated in the native token. When the price of these falls, the dollar value of stakers’ revenue falls proportionally, while the dollar cost of running a validator node — servers, bandwidth, operations — remains largely fixed.

The composition and magnitude of these rewards is not fixed by market forces alone. It is also governed by the protocol itself, through inflation schedules and  fee-sharing mechanisms that can be subject to modification over time. The current position on Solana is illustrative: inflation-based issuance accounts for approximately 92% of total staker income, with fee revenue contributing only around 8%. That issuance is reducing according to a pre-determined schedule — declining from today’s rate of approximately 3.8% toward a terminal floor of 1.5% — while the fee revenue that must eventually replace it is currently small and falling on a per-transaction basis. A risk manager building a multi-year infrastructure dependency on a proof-of-stake network should understand not just the current level of staking returns but their structural basis, and how governance decisions and protocol schedules could alter it over time.

If the price falls far enough and for long enough, or if staking returns deteriorate for structural reasons, validator economics become marginal or negative for smaller or less efficient operators and dollar returns to stakers become unattractive. Some of each exit. The staking ratio — the share of total token supply committed to the validator set — falls. Network economic security, measured by the cost of acquiring sufficient stake to threaten consensus, falls with it. If institutional confidence then erodes and activity migrates to alternative venues, fee revenue falls further, completing a self-reinforcing loop.

The Price-To-Security Transmission

▸  Token price declines or staking returns deteriorate — validator dollar revenue falls; node operating costs unchanged

▸  Marginal validators and stakers exit — economics become negative for smaller operators

▸  Staking ratio falls — economic security weakens; attack cost declines

▸  Institutional confidence erodes — reduced security metrics trigger internal risk committee review

▸  Activity migrates; fee revenue falls — validator economics weaken further; loop closes

 This feedback loop distinguishes proof-of-stake infrastructure from traditional infrastructure. It does not require a catastrophic event to activate — it operates continuously, with the severity of the feedback proportional to the scale and duration of the underlying pressure.

How Significant?

The resilience case — and its limits

The crypto world has a substantive response to the feedback loop concern, rightly focusing on the intrinsic resilience of distributed networks and with increasing real data to back up the arguments. Take Solana for example.

●      Solana’s Nakamoto coefficient is currently 19³ — the number of validators that must be compromised to threaten consensus. This is structurally more resilient than most traditional infrastructure, which typically has a Nakamoto coefficient of 1.

●      The 2022 bear market saw SOL fall over 95% from peak. The staking ratio remained above 60% throughout⁴. Network operations were not threatened — empirical evidence of resilience under severe conditions.

●      The epoch-based unstaking system acts as a circuit breaker. Solana caps the total stake that can exit per epoch, preventing sudden mass withdrawal and giving replacement capital time to enter.

●      Staking markets are self-correcting: exit of some validators increases returns for those that remain, creating a natural economic floor.

A risk manager might push back, arguing that these statements, while true, have not been tested in institutional conditions and institutional confidence, and hence commitment, has its own dynamic. But these arguments are non-specific and somewhat circular. So, nothing to worry about then? Well, not so fast. There are two more things to consider, that could work in tandem to create a tail risk to network integrity:

●      Leverage in the staking pool;

●      The relationship between the value of business on the network and the cost of attacking it.

The Leverage Amplifier

Leverage: a structural reality — and its true risk

A fraction of the total stake on many protocols is funded by borrowing. The dominant mechanism is the leveraged staking loop. A participant deposits native tokens into a liquid staking protocol, receiving a liquid staking token (LST) in return. The LST is posted as collateral in a lending protocol to borrow more native currency. That borrowed currency is also staked, generating another LST, which is redeposited as collateral and so on. Each loop adds a spread between staking yield and borrowing cost.

Liquid staking is available as a retail product with up to 10x leverage through lending protocols like Kamino Finance, as well as to institutional participants. Its attractions are obvious: at 8x leverage, a 1% carry between borrow costs and staking yields can double returns on staking. However, the risks are equally obvious: negative carry erodes capital and, as Kamino’s own documentation states plainly — there is no floor.

This raises two possible risks. The first is that network security rests on a lower equity base than headlines suggest. If a significant portion of stake is funded by credit, then the cost of destabilising the network is lower than the headline staked value implies, and new attack vectors — for example through borrow rate manipulation or a lending protocol exploit — come into play. Under current consensus rules the liveness threshold is 33% of stake; under the forthcoming Alpenglow upgrade it falls to 20% — see note 5.

Current data suggests the on-chain leveraged staking position is small. Across 86% of Solana lending TVL, LSTs posted as collateral total roughly $895m — 2.8% of the $32bn stake. Native SOL actually borrowed is $369m, or 1.2% of total stake at most, if the entire amount were used for staking — which is an upper bound since borrowed SOL has multiple uses. A full unwind of the visible position would not have a significant impact on total value staked. So, it does not appear that Solana faces any imminent risk from credit-inflated stake .  That said, it should be remembered that while on-chain lending is fully observable, lending through centralised venues or prime brokers is not, and could be larger. In addition, positions could grow quickly given the availability of one-click retail leverage products.

The second risk is exposure to a more generalised cascading collapse of the leveraged position.  Intrinsic features of both staking and lending protocols make this unlikely, but not impossible.

●      Stake does not incur credit risk in the conventional sense: it is locked by the protocol and its release is guaranteed after an unbonding period. Certain protocols implement slashing, which could reduce the amount returned in a way similar to the application of a haircut on residual values of traditional credit assets. However, slashing has rarely occurred and the values involved have been small. Across a diversified LST pool the impact is easily managed through loan-to-value rules. Solana does not currently implement slashing.

●      Pricing of LSTs as collateral is accounting-based not price-based on some staking pools, meaning temporary depegs between LST and native token will not trigger deleveraging w hich could spark a run on the lending pool.

●      The conditions for a rapid forced unwind are demanding: forced liquidations at scale would require either extreme carry inversion severe enough to overwhelm the rational exit option, or borrowers sufficiently inattentive to allow capital erosion over an extended period. Voluntary exiters would only choose to sell collateral into the market if the market impact were less than the cost of continuing to hold negative carry — a natural ceiling well above loan haircut levels.

●      However, two caveats apply. First, correlated stress across collateral types: if a widely-held asset used as collateral elsewhere — a large RWA position or a major DeFi protocol — suffered a significant loss, the resulting forced selling could transmit stress to LST markets through channels unrelated to staking carry economics, potentially overwhelming the rational exit calculation. Second, confidence events independent of economic fundamentals: a security breach, an extortion incident, or a governance crisis at a major lending protocol could trigger precautionary withdrawal by lenders who face no economic loss but are unwilling to bear operational risk

In summary, leverage should be on a risk manager’s dashboard, but it is probably not raising red flags at the current time.

An Open Analytical Question

Does the value of network business create an attack incentive?

The final question is whether, as institutional adoption grows and the value of business supported on the network increases, the cost of mounting a successful attack keeps pace.

The economic logic is straightforward. The potential payoff to a successful attack on a settlement network has some relationship to the value of business it is processing — transactions in flight, DeFi positions outstanding, settlement obligations not yet finalised or asset positions held. Call this V. The cost of a successful attack is roughly proportional to the staked value that must be acquired or destabilised — call this C. When V exceeds C by a sufficient margin to compensate for the probability of failure and the risk of detection, the attack becomes rational. Remember also that the payoff does not necessarily need to be financial. As protocols establish their positions as important financial infrastructure, malicious states or terrorist organisations may see value in disrupting them, and several recent exploits have been attributed to state-backed actors.

When evaluating the risks arising from the V/C relationship, we need to define our terms carefully. On a public blockchain, an attacker must control a supermajority of stake — approximately 66% in Byzantine consensus mechanisms — in order to seize control of block production and do things like double-spend settled balances. This is expensive and likely only to capture a fraction of V because outstanding DeFi positions cannot be seized, and proceeds become unsaleable once the attack is public. The gap between V and C must become very large for such an attack to become economically viable.

However, a lower threshold of stake is sufficient for a liveness attack⁵ — halting block production, preventing transaction settlement, and generating increased uncertainty as to settlement status. These outcomes may be attractive to a strategically motivated attacker such as a state actor attempting to undermine an important piece of financial infrastructure, or even an unscrupulous trader with a sufficiently large short position in the native token of the protocol.

There is no suggestion that either C threshold is currently breached. However, the trajectory of institutional adoption — if successful — grows V rapidly and independently of C, especially absent institutional participation as validators. Three additional factors could widen the ratio still further. The first is a bear market in the native token: V, which is partly comprised of non-native assets (stablecoins, tokenised equities, RWAs), maintains its dollar value even as native token price falls; C, which is entirely native-denominated, falls with the price. The V/C ratio therefore rises precisely when price is falling and institutional confidence may already be under pressure. The second is structural deterioration in the economic returns on staking — whether driven by planned changes to the protocol or by exogenous factors — reduced incentives mean reduced stake. The third is leverage compressing the true equity base underlying C, as outlined in the previous section. These factors may compound to increase the overall risk.

Traditional financial infrastructure addresses this dynamic through regulatory backstops, mandatory participation requirements, and mutualised loss-sharing arrangements that ensure the cost of defending the system scales with its systemic importance. None of these mechanisms currently exists for blockchain protocols. Whether a minimum V/C ratio can be derived analytically — below which an attack is irrational regardless of the payoff — is a formal security economics question that has not been applied to proof-of-stake networks in any published work. However, the conceptual point is more important than any specific number.

Practical Implications

What a bank risk manager should actually do

The channels described above — validator economics, regulatory capital cost, leverage in the staking pool, and the evolving relationship between network value and attack cost — are real and simultaneously active in the current bear market. None is sufficient to disqualify blockchain as infrastructure; all are sufficient to require that the risk be actively managed rather than passively assumed away.

●      Monitor the staking ratio as an operational risk indicator. The staking ratio is the primary observable measure of network economic security. A sustained decline should trigger review of infrastructure arrangements in the same way that a credit rating downgrade triggers review of counterparty exposures. Defining the internal threshold at which your institution’s risk framework requires reassessment — and monitoring against it — is the minimum sensible practice.

●      Understand the composition of staking rewards, not just their level. Staking returns draw from multiple sources — fee revenue, protocol-determined issuance, and MEV — each with different stability characteristics. Issuance rewards are governed by the protocol and can change through governance decisions; fee revenue depends on network activity and competitive take rates; MEV is sensitive to ecosystem architecture. A risk manager who monitors only the headline yield without understanding its structural basis may be surprised by changes that were visible and anticipated by those closer to the protocol.

●      Understand the leverage structure in the staking pool. On-chain data suggests visible leverage is currently modest, but off-chain exposure through centralised venues is unobservable. A risk manager who monitors only the nominal staking ratio without understanding the leverage underneath it — and its off-chain component — is monitoring the wrong number.

●      Engage with the BCBS review process. The targeted review of SCO60 underway in 2026 will determine the capital cost of institutional exposure for years to come. A bank with a considered analytical view of a network’s infrastructure risk profile is better placed to engage with that process — including on the specific question of institutional validator participation — than one that has simply applied the 1,250% weight without analysis.

●      Treat price stability as an infrastructure requirement, not a market preference. A high but volatile token price may be less desirable for settlement infrastructure purposes than a lower but stable one anchored in growing fundamental value — because volatility sustains both the validator economics feedback loop and the regulatory capital constraint simultaneously.

Conclusion

Infrastructure needs a different analytical language

The question of whether SOL price matters for operational resilience does not have a simple answer, and anyone who gives you one — in either direction — is oversimplifying. The two transmission channels are real and structurally embedded. Solana’s design has genuine resilience properties that a superficial analogy to traditional infrastructure misses. The leverage in the staking pool is currently modest on observable data but partially opaque and capable of growing. The relationship between network value and attack cost raises questions that extend beyond the financially motivated attacker — state actors and strategically motivated parties face a different calculus for which the conventional V/C framework is insufficient. The regulatory capital constraint is crude but not irrational in its underlying concern.

What is clear is that the analytical infrastructure for thinking about these questions rigorously does not yet exist in a form that bank risk managers, prudential supervisors, or the network’s own governance can easily operationalise. The absence of that framework is not an argument against blockchain as settlement infrastructure. It is an argument for building it — and for recognising that institutional adoption will require that work to be done before the questions are asked under stress.

Financial infrastructure earns its status through demonstrated reliability, understood risk, and analytical tractability. Solana has demonstrated technical reliability to a degree that deserves serious institutional attention. The analytical tractability — the continuous monitoring of staking leverage, the composition and structural basis of staking rewards, the V/C ratio across both financial and non-financial attacker profiles, and the carry dynamics of the staking pool — is the work still ahead.

[1] SCO60 is in force in Hong Kong from 1 January 2026; the EU has a transitional regime in place pending a permanent legislative proposal. The UK and Singapore have both delayed implementation to 2027, with Singapore actively consulting on a materially more permissive alternative framework. The US has not adopted SCO60 and is developing its own approach.

[2] Validators can also be stakers if they use their own resources, but many gather “delegated stake” from third parties, and pass revenues back to them, minus commissions. The composition of rewards — fees, issuance, and MEV — and the governance processes that can alter them are discussed in section 3.

[3] Source: Validators.app / Solana Beach, August 2026.

[4] Source: DeFiLlama staking data / Messari network reports, 2022–2023.

[5] In Byzantine systems, the liveness attack threshold is 33% of stake. Solana is implementing Alpenglow (SIMD-0326, approved by 98% of validators; source: Anza Alpenglow whitepaper and SIMD-0326 specification, 2025), which adopts a 20+20 combined fault tolerance model: the network remains live provided malicious stake is below 20% and offline stake is below a further 20% — halting if the combined total exceeds 40%. An attacker controlling just over 20% alone cannot halt production; they would also need to induce a further 20% of honest stake to go offline. However, crossing the 20% threshold breaches the formal safety guarantee — derived from the Votor voting mechanism, which requires overlapping vote sets that cannot both achieve quorum if Byzantine stake exceeds 20% — potentially enabling a malicious actor to sign conflicting blocks, create forks, and undermine settlement certainty. These outcomes are valuable to a strategically motivated attacker even without halting the chain. Alpenglow is expected on mainnet via Agave 4.1 in late 2026.