It's pretty close, though. It easily survives a trip through the washing machine or a swim

Yes it is. It will get soggy, but once it dries it will be perfectly fine. It's mostly cotton, isn't it?

But they rip when wet. They also rip when dry!

British, Canadian, Australian bank notes can't be ripped when wet or dry - they're polymer.

Thankfully, you can exchange them even if they're totally torn up as long as you have the pieces.

Wouldn't it be better not to have to do that thanks to them being waterproof?

Yes.