The board of governors are representatives from each of the countries so it is still democratic, as those representatives are appointed by the elected governments of those countries.
If it has turned the sovereign nations into states of a larger country depends on if the members of the board of governors each has power of veto or if it is a majority vote. If it is a majority vote it is the creation of a new country.
But a government with no military is powerless. Treaties are just bits of paper, they can be broken. Power comes ultimately from the barrel of a gun not cash in a defacto currency.