As the war with Iran and the closure of the Strait of Hormuz send oil prices soaring, inflation is once again at the forefront of investors’ minds.
In the US, inflation accelerated last month to 0.9%, driven mainly by energy costs linked to the conflict in the Middle East; core inflation, which excludes energy and food costs, was surprisingly worse than estimates. February’s overall increase was just 0.3%.
For Michael Ashton, co-founder of the USDi stablecoin with Andrew Fately, the numbers highlight a flaw in crypto’s monetary architecture.
“The stablecoin boom has accidentally rebuilt only half of the monetary system,” Ashton told CoinDesk in an interview. “Stablecoins solved the medium-of-exchange problem for crypto, but none solved the store-of-value problem. USDi is the first serious attempt to finish building the on-chain monetary system.”
The $300 billion stablecoin market, dominated by dollar-pegged tokens, has become a major plumbing for crypto trading and payments. But these tokens, typically backed by cash or Treasury bills, are designed to hold a face value of $1, not retain purchasing power. In real terms, Ashton argues, they are losing value.
“As stablecoins graduate from crypto trading tools to true payment infrastructure, the store of value gap becomes a real institutional concern, not just a philosophical one,” he said. “Treasurers, neobanks and cross-border payment platforms that float stablecoins are quietly taking on an inflationary risk that they probably haven’t priced in.”
USDi
USDi is an attempt to fill that gap.
Instead of tracking the dollar, the token is designed to track inflation itself. Its value increases in line with changes in the US Consumer Price Index (CPI), effectively making it a blockchain-native version of an inflation-protected principal.
Ashton describes the USDi as closer to the principal value of Treasury Inflation-Protected Securities (TIPS), but without some of the downsides that have caught investors by surprise in recent years.
While TIPS offer inflation linkage, they are still bonds, meaning their market price can fall when interest rates rise. USDi, on the other hand, aims to function more as an inflation-linked savings instrument.
The stablecoin’s reserves are invested in a low-volatility private fund called the Enduring US Inflation Tracking Fund, which uses TIPS, US Treasury debt, foreign exchange and commodity futures and options; to generate returns.
“There’s not really an inflation-protected savings account,” Ashton said. “That’s the gap we’re trying to fill.”
Oil-fueled inflation
Oil markets have been in a sharp and volatile recovery since the outbreak of the Iran war in late February. Prices initially jumped into the $80s before quickly breaking above $100 a barrel as fears grew over disruptions in the Strait of Hormuz, a key artery for about 20% of global supply.
Increased oil prices can stimulate inflation by increasing transportation and production costs across the economy, which are often passed on to consumers in the form of higher prices.
The moves have been marked by extreme volatility, with daily swings driven less by fundamentals than by headlines, as markets price in an ongoing war premium tied to the risk of prolonged supply disruption
“T-bills are around 3.5%, inflation is around 3%, but historically inflation has often outperformed short-term rates over longer periods of time,” Ashton said. “We may return to that pattern.”
The dynamics, he added, strengthen the case for an asset explicitly designed to track inflation rather than nominal returns.
Yet Ashton frames the USDi as more than a tactical trade. He sees it as a structural evolution in crypto, one that completes the system bitcoin began.
“Bitcoin was conceived as an alternative monetary system and potentially as a store of value like gold,” he said. “But its volatility makes it difficult to use that way over shorter horizons. Stablecoins solved the payment side. Now we have to solve the store of value side.”
Adjusted inflation exposure
Beyond its core design, USDi plans to introduce something Ashton says is difficult or impossible to replicate in traditional finance: customizable inflation exposure.
The CPI itself is a composite of several categories, including housing, health care, transportation and education. USDi’s architecture, Ashton said, could eventually allow users to tailor exposure to specific components of inflation.
“You don’t have to keep a collective basket,” he said. “You can isolate inflation in healthcare, or education, or energy. You can even tailor it by geography: Dutch inflation, French inflation, US core CPI.”
This flexibility allows for more specialized applications, particularly in industries with direct exposure to specific cost pressures.
For example, insurance companies face inflation risk in areas such as medical costs, but lack precise hedging tools. Traditionally, they have managed such risks by holding more capital or transferring exposure through reinsurance or catastrophe bonds. But these tools are blunt and often unavailable for certain types of inflation risk.
“There’s never really been a direct hedge for something like healthcare inflation,” Ashton said. “If you can hedge that exposure more accurately, you can reduce the capital you need to have or expand the amount of business you can underwrite.”
He expects insurers and reinsurers to be among the earliest institutional adopters in a second phase of USDi’s rollout.
Other potential uses include education funding. Programs already exist in parts of the United States that allow families to prepay tuition years in advance, effectively locking in prices. Ashton sees a tokenized inflation hedge as a more flexible alternative.
“Tuition is a classic inflation risk,” he said. “Being able to uncover that directly, that’s powerful.”
Fundraising
USDi is already up and running, and Ashton is targeting a seed raise of around $1.5 million in the coming months.
The broader pitch, however, is less about funding and more about reframing how investors think about risk.
“You’re born with inflation risk,” Ashton said. “You are not born with credit risk or equity risk.”
Read more: Oil Shock, Iran War Risk Keeps Crypto Investors Sidelined: Shades of Grey
