Second, that the State would want to allow a free market currency of fixed supply to compete with their own digital currency that can be whimsically inflated and used to fund endless warfare and welfare just doesn't fit the historical record.
Never, in the past hundred some odd years, has any competing currency been adopted by the banking system because of innovative features.
Bitcoin is innovative because it gives people control over a form of globally accepted currency which cannot be debased or manipulated. Bitcoin can be sent and received by any person in the world, in any amount, at any time, for any reason. That's why Bitcoin is important. Bitcoin is _not_ important if it just compliments the existing banking system's functions, or makes it cheaper. It's important because it frees humanity from the arbitrary clutches of the State. It gives power back to the individual at least in matters of money and finance, and everything else can follow from that.