As the conflict with Iran and the closure of the Strait of Hormuz drive oil prices higher, inflation has returned as a primary concern for investors. In the U.S., inflation accelerated to 0.9% last month, largely propelled by energy costs linked to the Middle East war. Notably, core inflation, which excludes volatile food and energy prices, fell short of expectations, while February's headline increase was just 0.3%.
This environment has highlighted a perceived flaw in the cryptocurrency monetary system, according to Michael Ashton, co-founder of the new stablecoin USDi. "The stablecoin boom has accidentally rebuilt only half of the monetary system," Ashton told CoinDesk. "Stablecoins solved the medium-of-exchange problem for crypto, but nobody solved the store-of-value problem. USDi is the first serious attempt to finish building the monetary system onchain."
The $300 billion stablecoin market, dominated by dollar-pegged tokens like USDT and USDC, serves as essential infrastructure for crypto trading. However, these tokens are designed to maintain a nominal value of $1, not to preserve purchasing power. Ashton argues that in real terms, they are losing value due to inflation. "As stablecoins graduate from crypto-trading tools to genuine payment infrastructure, the store-of-value gap becomes a real institutional concern," he said, noting that treasurers and payment platforms holding stablecoin float are exposed to unpriced inflation risk.
USDi is engineered to address this gap. Instead of pegging to the U.S. dollar, the token is designed to track the U.S. Consumer Price Index (CPI), effectively functioning as a blockchain-native, inflation-protected principal. Ashton describes it as similar to the principal value of Treasury Inflation-Protected Securities (TIPS) but without the interest rate risk that can cause TIPS prices to fall.
The stablecoin's reserves are invested in a low-volatility private fund called the Enduring U.S. Inflation Tracking Fund, which utilizes TIPS, U.S. Treasury debt, foreign exchange, and commodity futures and options to generate returns. "There isn’t really an inflation-protected savings account," Ashton said. "That’s the gap we’re trying to fill."
The immediate catalyst for this focus is the oil market. Since the outbreak of the Iran war in late February, prices have surged from the $80s to above $100 per barrel, driven by fears of prolonged disruption to the Strait of Hormuz, which handles roughly 20% of global oil supply. This volatility has injected a persistent war premium into prices, with elevated energy costs threatening to stoke broader inflation across the economy.
Looking ahead, USDi plans to introduce customizable inflation exposure, allowing users to tailor their hedge to specific components of CPI, such as healthcare, tuition, or energy costs, or even to different geographies. Ashton sees early institutional adoption from sectors like insurance and reinsurance, which lack precise tools to hedge against specific inflation risks like rising medical costs. The project is currently operational and targeting a seed raise of approximately $1.5 million.
