The ability of Bitcoin to eliminate the risk of fractional reserve depends entirely on the vigilance of the users. Bitcoin allows us to pressure institutions including an ETF but also exchanges etc to be fully transparent about reserves, more so than with other commodities.

Yet many of the most popular exchanges are not transparent about reserves. It's likely fractional reserve is already happening as a result, and there are more 'imaginary' Bitcoins than the amount on the blockchain. If an ETF is not transparent it could bring Bitcoin to the same place as Gold eventually (hundreds of times more paper gold than physical gold).