A team of experienced derivatives and foreign exchange traders in the United States is introducing USDi, a stablecoin created to align its value with inflation. The stablecoin's worth will be adjusted regularly based on Consumer Price Index (CPI) data and the performance of Treasury Inflation-Protected Securities (TIPS).
The founder, Michael Ashton, is aiming to provide an asset that can uphold purchasing power by reducing exposure to inflation risks. However, in the competitive stablecoin market, USDi will need significant early support to establish its position.
A Stablecoin Designed to Combat Inflation?
Stablecoins are currently receiving significant attention, fueled by favorable US regulations that could lead to a surge in trading activity. With the United States fostering a pro-regulatory environment and witnessing increased adoption, many new entrants are exploring innovative initiatives.
Today, Michael Ashton, a derivatives trader, unveiled USDi, a stablecoin tailored to combat inflation.
According to Ashton, "There isn’t actually a riskless asset at present, and that’s inflation-indexed cash. Holding cash represents a bet on future opportunities, with inflation serving as the cost of that wager. By introducing inflation-indexed cash, this risk is eliminated.”
While investors have utilized cryptocurrencies as a hedge against inflation for years, USDi presents a fresh approach to this issue. Ashton, alongside two co-founders, an FX professional, and a technical expert, established the entity USDi Partners LLC.
USDi is a stablecoin correlated with the US dollar but is not pegged to it. Instead, it will loosely track the dollar while its value will move in sync with US inflation.
Though the concept may appear complex, the stablecoin's value is defined by a straightforward system. Essentially, Ashton detailed that USDi's value will increase in line with regular CPI reports, calculating total inflation since a set start date.
With December 2024 as the commencement date, USDi's value remains relatively close to the dollar. Presently, the price of USDi stands at $1.00863.
Inspired by Treasury Inflation-Protected Securities (TIPS), a government bond designed to safeguard against inflation, USDi's value adjustments will align with the more frequent data utilized by TIPS investors, given that CPI reports occur monthly.
To maintain this mechanism, Ashton will oversee a reserve fund that serves as the stablecoin's backing. USDi Partners will create and eliminate tokens based on the daily inflation rate, along with a minor transaction fee.
Only accredited investors can participate in the initial rollout, with an official release date still pending from USDi Partners.
In essence, USDi presents a distinctive offering within the cryptocurrency realm, though it faces stiff competition in the stablecoin market. Ideally, Ashton and his colleagues will garner early support to kickstart this endeavor successfully. Should it prove fruitful, it could serve as a testament to the practical applications of cryptocurrencies.