Tether is using this model but instead of issuing a cryptocurrency, it issues a token tethered to the amount deposited. As Bitreview points out though:

Tether's central reserve model reintroduces an inherent weaknesses that bitcoin meant to replace. And this is not simply an ideological exercise. Tether's reserve account represents a single point of failure which, whether by accident, incompetence, evil design or force majeure, could undermine their entire currency.

http://bitreview.com/altcoin/tether