A group of veteran derivatives and FX traders in the US are launching USDi, a stablecoin designed to adjust its price in line with inflation. Its value will change regularly based on Consumer Price Index (CPI) data and the performance of Treasury Inflation-Protected Securities (TIPS).

Founder Michael Ashton aims to offer an asset that maintains purchasing power by minimizing exposure to inflation risk. However, with intense competition in the stablecoin market, USDi will need strong early traction to carve out its place.

A Stablecoin To Beat Inflation?

Stablecoins are in the spotlight right now, with friendly US regulation spurring a potential boom in trading volumes. Given the current pro-regulatory environment in the US and growing adoption, many new players are innovating.Today, derivatives trader Michael Ashton announced USDi, a stablecoin built to fight inflation.

“The riskless asset doesn’t actually currently exist, and that’s inflation-linked cash. Holding cash is an option on future opportunities, and the cost of that option is inflation. If you create inflation-linked cash, that’s the end of the risk line,” Ashton claimed.

Investors have been using crypto to hedge against inflation for years, but USDi is a novel approach to the problem. Ashton joined two co-founders, an FX veteran, and a technical specialist, to create the firm USDi Partners LLC.

USDi is a stablecoin that is correlated with the dollar but isn’t pegged to it. Instead, it will loosely orbit the dollar, but its value will fluctuate alongside US inflation.

That prospect may seem convoluted, but a simple system defines the stablecoin’s value. Essentially, Ashton claimed that USDi would rise in accordance with regular CPI reports, calculating the total inflation since a predetermined start date.

This date is December 2024, so it’s still quite close to the dollar. Today, for example, USDi’s price is $1.00863.

The novel stablecoin is inspired by the Treasury Inflation-Protected Securities (TIPS), a government bond designed to protect against inflation. Since CPI reports only happen once per month, Ashton will adjust USDi’s price in accordance with more frequent data used by TIPS investors.

To maintain this system, Ashton will manage a fund that acts as the stablecoin’s reserves. USDi Partners will mint and burn tokens according to the daily level of inflation, plus a small transaction fee.

Only accredited investors can partake in the initial launch, but USDi Partners hasn’t announced an official release date.

In short, USDi seems like a unique approach to the crypto economy, but the stablecoin market is full of competition. Ideally, Ashton and his co-founders will be able to get some early traction to get this project off the ground.

If it proves successful, it can help demonstrate the versatility of crypto’s practical applications.