Yes. And yes.

Rugpull: it’s still a custodial service. Consider Wallet of Satoshi or Alby, two popular custodial Lightning services. eCash delivers a specific benefit over these services by dramatically improving the users’ privacy. But one still must be aware of the risks of not holding your own keys.

Fractional reserves: this is a risk with any custodial service, especially when you get into using a medium that represents the thing held in custody (cash to gold) rather than making daily withdrawals/transactions in the asset itself. As with above, a custodial Bitcoin service (without eCash) could still do this; banks can do this. Some do. But the option exists for demonstrating proof that the assets in custody are a 1:1 ratio to the tokens issued. How that would work is definitely beyond my technical knowledge, but my understanding is that it’s possible.

So - tradeoffs, as with everything, but arguably better tradeoffs than existing alternatives. Hope this helps 🫡 

 How could those risks be mitigated? 

 Rugpull: shared/federated custody (see fedimint)

Fractional reserves: published proof of reserves — I don’t know if/how this would work in a provable way. But I believe it’s possible…