All money is a coin created by a national government. USD is America Coin, Sterling is UK coin, Yen is Japan coin, etc.
Within the boundaries of the nation, everyone uses the national coin.
All goods and services are produced somewhere. If produced and consumed in the same nation, the same coin is used.
Things get interesting with international trade. All countries cannot produce every single last thing they want. So they have to purchase from other countries. And the other countries require the use of their own coin when buying their goods and services.
Exporters get paid in their nation’s coin, which becomes an important source of foreign currency for the central bank / government. More exports = more conversion into the nation’s coin = more forex. If a car exporter sells cars, the central bank will facilitate payment to them in local coin, but the central bank will take and store the forex.
Things get very interesting (and corrupt) with imports. In any given nation, there is only so much forex. If you try to acquire more forex (like USD) by printing more local coin and then trading it for USD, you will get inflation. So countries with well managed central banks try and avoid this. So who can use the limited USD to import what they want becomes subject to political will. Often politically favored firms get access to the USD to buy the goods and materials they need, which they then sell locally. If there simply isn’t any more USD to buy stuff, competitors can’t enter to be an importer.
As the most important good in the entire world - oil - is traded almost exclusively in USD, every country has an everlasting and unquenching thirst for USD. This gives the US enormous power, as it can print more money with way less risk of inflation than other countries can. It also lets the US get ever cheaper goods and services from abroad with such demand for a good that takes a mouse click to produce (USD).
Bitcoin (and other cryptos if they can be successful) is extremely dangerous to this model because it is not controlled by any government. It is exactly like the old gold system, except way better because you don’t need to protect the gold with soldiers and vaults, move it with huge ships, and so on. It’s gold on the internet.
If goods start being priced in Bitcoin directly, it will be akin to the old global system of everything being priced in gold.
But in general, think of fiat money like coins and central banks as a single centralized validator node that has sole authority to mint new coins.