The cash reserve ratio of all banks operating in such a system is 100% making the deposit multiplier equal to zero and the commercial banks' propensity to loan very low.
A system in which all currency is backed by another asset and commercial banks are required to maintain a 100% cash reserve ratio has never been implemented in any actual economy. The closest system is that of a currency board, in which commercial banks are not required to maintain a 100% cash reserve, but all of the money in circulation is backed by another asset held by the central bank. This system is in use in Hong Kong where the Hong Kong dollar is backed by United States dollars deposited in the Exchange Fund of the currency board.
See also: fractional-reserve banking.