I don't think you understand what I was trying to say. I'm well aware that they create money, but they're literally not printing dollars. They do not cause M0 to increase.

Nobody but the Treasury can cause physical dollars to be created, but that doesn't prevent fractional reserve from occurring.

So, anybody who claims Bitcoin doesn't support fraction reserve based solely on the fact that banks can't create new Bitcoin is incorrect.

What is created is an IOU. A bank says that hay, I will pay 1 usd to you. And you can transfer that IOU to the coffee shop. Now, there is literally nothing stopping the "bank"[1] to make a bitcoin IOU and you to transfer that to the coffee shop owner. In that case you have increased the monetary supply of "bitcoins", as it is irrelevant for the coffee shop owner if he is receiving a bitcoin or an IOU of one bitcoin from a credible institution. There is no difference to the case where it is irrelevant if you get a dollar bill or a IOU from a bank. Both are called dollars for a very good reason, and if you just swap dollar to bitcoin, both can be called bitcoin.

[1] Well, except current regulators, but they obviously do not exist in bitcoin economy...