I think once you've laundered drug money into dollars, it's spendable just like dollars are spendable. But it also makes sense they want dollars because dollars can pretty much be spent on anything anywhere.
>> If someone takes your Bitcoin > This is one big if, and it will still be prosecutable by courts, as evidenced by all the current legal cases about crypto theft.
Well first you have to find the perpetrator -- then you have to find the money. Do enough transfers and mixing currencies together and it becomes near impossible to trace. This gets worse if it's state sponsored hacking (Russia or China, say)
> A lot of countries with good military might (e.g., North Korea) don't have valuable currencies.
That's because NK doesn't have a lot of trust. Saddam Hussein hoarded US dollars [1] even though he could have used Iraqi currency instead (since afterall he was the leader of Iraq and the currency had his face on it). That's because nobody really trusted Iraq's currency -- not even the leader himself.
[1] https://www.nytimes.com/2003/04/20/world/nation-war-baghdad-....
I have heard dollars are popular with crime orgs all the world over, who are unlikely to use or be able to use the dollars in US courts. Dollars are valued by people (and they exchange goods/services for it), and Americans need them to pay their taxes.
> If someone takes your Bitcoin
This is one big if, and it will still be prosecutable by courts, as evidenced by all the current legal cases about crypto theft.
> Same thing with the Euro and all the other major currencies (and even a lot of the minor ones). They have the threat of legal recourse and military violence back them.
Military might matters only so far as it defends the country and makes it possible to produce stuff that other people want. A lot of countries with good military might (e.g., North Korea) don't have valuable currencies.