It seems to be a stretch to call this a "digital currency", since it is "directly tied" to the local currency. Besides, digital currencies are not really interesting, as one can make digital transactions of traditional, "non-digital" currencies.
I would be very interested in a crypocurrency run by the Federal Reserve (bitcoiner brains pop). The fed would be able to peg the bitBuck at 1:1 exchange rate with the USD$ but also have many of the benefits of cryptoprotocols.
Isn't USD already a mostly digital currency? Only around 10% of all dollars exist as bank notes or coins.
What would a centralised cryptocurrency contribute? If you're centralised, you don't need the crypto part of all, which handles distributed trust. "Crypto" here doesn't refer to all applications of cryptography, but to the blockchain.
So what do you have in mind? Perhaps a blockchain where every block has to be signed with a unique private key? This seems even more horribly inefficient than the current digital USD.
Yeah, I have difficulty understanding this too. In what sense is USD not a digital currency? The vast majority of USD exists only in digital form, albeit it is exchangable for physical currency. The vast majority of USD transactions take place purely digitally. To be sure, the implementation is not as nice as some people would expect, as not every bank has a convenient/free/cheap way to send currency to other individuals (though plenty do).
Is "digital currency" just a buzzword? A misnomer referring to cryptocurrencies?
I think people just fundamentally misunderstand money. USD is "real" money and Bitcoins are "fake" money. They use other words instead of "fake", such as "virtual" or "digital", but the intent is the same: it's not as valid as USD. The actual details of how the money works across the internet are not under scrutiny. What people seem to convey with words like "virtual" and "digital" is distrust: this is not as real as USD.
This sort of distrust with new methods of currency is not new. Bank notes were viewed with suspicion and not as real as coins when they were first introduced into Europe from China.
It's 'fake' in the same sense that 'investing' in say, trading cards or some other good mostly backed by the interest of the public to buy it is. In fact, it's very much like stock for quantities of stock too small to have a meaningful impact on corporate operations.
What is backing USD or any currency other than the interest of the public? It's not like any country gets to dictate to other countries how much their money is worth.
More generally, currencies are backed by demand for that currency. A lot of that demand is ouroboros-style circular demand of two kinds: (a) shops demand the currency for their goods because their suppliers and employees demand it, who in turn demand it because shops demand it; and (b) people have loans because somebody else demanded currency, and now they will be subjected to demand for a longer time period.
Taxes are special in that they create an outside demand for the currency, so they act as the bootstrap and anchor of this whole demand cycle.
Also note that the sibling comment by jzwinck is confused: the Swiss central bank decided for some time to put an upper bound on the value of the Swiss franc. This is easy because they can always create more Swiss francs, and is irrelevant to your question.
This became news several days ago when they let their currency float again, resulting in a jump in its value and the ruin of multiple firms involved in foreign exchange trading.
