It was not always so. Private banks were the main issuers of paper currency in the United States and Canada a century ago, and were the sole issuers in virtually every country two centuries ago. Nationalization of currency is largely taken for granted today, but it shouldn't be. Adam Smith praised private currency for the benefits it had brought to his native Scotland. Most economists would agree that a legally enforced government monopoly is generally an inefficient way to produce private goods and services.
Currency is no exception to the rule.
As with other nationalized products, quality is lower than it would be under private competition. In developing countries, domestic currency typically derives its value from its redeemability at a fixed rate for U.S. dollars. To the extent that the central bank actually respects this agreement, a fixed exchange rate constrains monetary expansion and thus helps avoid the high inflation to which unanchored regimes in the developing world have often succumbed. The dramatic devaluations in Southeast Asia in 1997 illustrate how unreliable are the redemption pledges made by central banks in developing countries. Private commercial banks are more reliable.