Except that Jimmy isn't the only debtor in this scenario the bank is one as well so now the depositors will have to accept that their deposits are indexed to deflation. Except they don't have to as they can withdraw their BTC.
I guess the banks will just have to stop dabbling in so much fractional reserve gambling if they want to stay afloat.
FRB does not have to be in effect for this scenario. Lending of any kind will be a massive risk.