Why Kim Dotcom's BitCache is stupid

Kim Dotcom is working on a project called #BitCache that will allow for #Bitcoin microtransactions without putting stress on the current blockchain. I think it's stupid.

Kim is planning on using a sub-blockchain to handle microtransactions on his servers with his services, doing no actual Bitcoin transactions. When a user wants to cash out, it THEN sends the actual Bitcoins out of the system. This would most likely use one wallet that controls only deposits and withdrawals. This would allow his services to do millions of "bitcoin transactions" within his ecosystem without putting the load on the official Bitcoin blockchain.

But isn't this essentially what the US government does with the federal reserve? We started out by giving people paper dollars that represented their gold in the federal reserve. This would be the balance of your account on one of his sites. But look at what happened. Now all we have is worthless paper, no gold. If everyone starts to use this BitCache idea I'm afraid that the same thing will happen to the cryptocurrency world, and the existence Bitcoin existing will do almost no good for the mainstream user; which the success of Bitcoin is dependent on. The solution is to find a way to scale Bitcoin soon so that it can be taken to the mainstream (scalingbitcoin.org?), not turn into the US federal reserve and completely negate the point of Bitcoin.