Centralized Crypto Currencies are nothing new, actually only a minority of cryptocurrencies are properly decentralized. It stands to debate whether Bitcoin is one of them because more than half of the network is owned by very few instances, miners who thus have great power over the network[0].
Other currencies (probably the majority) don’t even try to be actually decentralized. Their concepts are fundamentally flawed though.
Physical money is a lot of things but not up to date, still it has many advantages over digital funds, which are mostly privacy related. There is no logging of the transaction, and an exchange of value without identity breaches is also “implemented”.
An average PayPal transaction is logged by over 600 trackers[1] and, as a result, contributes heavily to big data style collection of personal information and identity reconstruction.
The important difference between the two is that one is serviced by a private enterprise, which has profit maximization as its primary goal. And the other is provided by the most democratic instance we have, the state.
The interesting part is that the Blockchain technology has many attributes that are exclusive to physical money otherwise. It’s (at least partly) anonymous, cryptographically not duplicatable, offline usable, and so on. The defining difference is that it is not centrally managed, but instead, hosted through many decentralized blockchain instances, which makes it not just unbelievably volatile(in its value), but its transactions are irreversible and unreliable because of long delays and transaction fees.
The fusion of both, physical money, and the blockchain technology would be a centralized Cryptocurrency, backed and provided by the state. The idea is that you create a cryptographically secure framework, with very few, and legally secured, exceptions, which transactions would be signed, not through a decentralized blockchain algorithm, but instead, the state.
The result could be cryptographically secured anonymity, where it is needed, transparency where it is required, and stability that is fundamental to the monetary building block of a modern nation.
Additionally, as with the traditional physical money we already have, there would be no fees since they are collectively paid through taxes. Although the investment would have to be massive and, undoubtedly unseen, in the long-term, it would not just increase efficiency but also be less expensive.
The dangerous alternative is that the state creates a cryptographically unsecured version of digital money, which would not just be prone to corruption (miss- or abuse of funds through administrative root permissions), but, since there is no cryptographic anonymity, could also be used to spy on its people.
[0] https://www.nytimes.com/2022/06/06/science/bitcoin-nakamoto-blackburn-crypto.html
[1]https://netzpolitik.org/2018/visualisiert-mit-diesen-600-firmen-teilt-paypal-deine-daten/