I'm no expert, but I don't think that most banks would actually hold paper notes for every dollar they are storing for their account holders. In reality banks are already pretty much digital for most transactions.

What I am wondering is when* various governments are going to start enforcing existing regulations^, that apply to banks, on the various bitcoin exchanges.

* perhaps the exchanges already comply with these regulations, but I would be surprised.

^ don't ask me what the regulations are, I am guessing that banking is/should be a heavily regulated industry in most countries.

edit: formatting.