T-Bills Yield 3.5%, Inflation's 3%—This Stablecoin Says 'We Can Do Better'

As oil prices surge past $100 per barrel amid the Iran conflict and Strait of Hormuz concerns, inflation is back in the chat. U.S. inflation accelerated to 0.9% last month, driven mostly by energy costs linked to the Middle East conflict—though core inflation surprisingly missed estimates, with February's headline increase coming in at just 0.3%.

For Michael Ashton, co-founder of the USDi stablecoin alongside Andrew Fately, the numbers expose a crack in crypto's monetary plumbing. "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—has become essential infrastructure for crypto trading and payments. But these tokens, typically backed by cash or Treasury bills, are designed to hold a nominal $1 value, not preserve purchasing power. In real terms, they're bleeding value.

"As stablecoins graduate from crypto-trading tools to genuine payment infrastructure, the store-of-value gap becomes a real institutional concern," he said. "Treasurers, neobanks, and cross-border payment platforms holding float in stablecoins are quietly taking inflation risk they probably haven't priced."

USDi aims to plug that hole. Rather than tracking the dollar, it tracks inflation itself—its value increasing in line with changes in the U.S. Consumer Price Index. It's essentially a blockchain-native version of an inflation-protected principal, closer to the principal value of Treasury Inflation-Protected Securities (TIPS) but without some of the pitfalls that have bitten investors in recent years. While TIPS offer inflation linkage, they're still bonds—meaning their market price can tank when interest rates rise. USDi aims to function more like an inflation-linked savings instrument.

The stablecoin's reserves sit in a low-volatility private fund called the Enduring U.S. Inflation Tracking Fund, which uses 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."

Oil markets have been on a wild ride since the Iran war kicked off in late February. Prices initially jumped into the $80s before breaking above $100 as fears grew over potential disruptions to the Strait of Hormuz—a key artery for roughly 20% of global oil supply. Elevated oil prices can fan inflation by pushing transportation and production costs across the economy, which often get passed to consumers. The moves have been volatile, with daily swings driven more by headlines than fundamentals as markets price in a persistent war premium.

"T-bills are around 3.5%, inflation is around 3%, but historically, inflation has often outpaced short rates over longer periods," Ashton noted. "We may be returning to that pattern."

The dynamic strengthens the case for an asset explicitly designed to track inflation rather than nominal yields. Still, Ashton frames USDi as more than a tactical play—he sees it as a structural evolution in crypto that completes the system Bitcoin started.

"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 payments side. Now we need to solve the store-of-value side."

Beyond its core design, USDi plans to offer something Ashton says is tough to replicate in traditional finance: customizable inflation exposure. CPI itself is a composite of multiple categories—housing, health care, transportation, education. USDi's architecture could eventually let users tailor exposure to specific inflation components.

"You don't have to hold one aggregate basket," Ashton explained. "You could isolate health-care inflation, or tuition, or energy. You could even tailor it by geography: Dutch inflation, French inflation, U.S. core CPI."

That flexibility opens doors for more specialized applications, especially in industries with direct exposure to specific cost pressures. Insurance companies, for instance, face inflation risk in areas like medical costs but lack precise hedging tools. Traditionally, they've managed such risks by holding more capital or transferring exposure through reinsurance or catastrophe bonds. But those tools are blunt and often unavailable for certain inflation risks.

"There's never really been a direct hedge for something like health-care inflation," Ashton said. "If you can hedge that exposure more precisely, you can reduce the capital you need to hold, 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 applications include education financing—programs already exist in parts of the U.S. that let families prepay tuition years in advance, effectively locking in prices. A tokenized inflation hedge could be a more flexible alternative.

"Tuition is a classic inflation risk," Ashton noted. "Being able to hedge that directly, that's powerful."

USDi is already up and running, with Ashton targeting a seed raise of around $1.5 million in the coming months. The broader pitch, though, is less about funding and more about reframing how investors think about risk.

"You're born with inflation risk," Ashton said. "You're not born with credit risk or equity risk."