How is this materially different from the system we already have?

US dollars are just rows in a distributed database. The database is distributed over a network of banking nodes. The network is highly concentrated [1], and its super-nodes are already very difficult to distinguish from government in anything but a formal legal sense.

Insofar as I can tell, a digital currency would be the same thing as government saying "banks need to provide unrestricted access to their networks" which has basically happened already.

[1] https://www.ffiec.gov/npw/Institution/TopHoldings

It is not a Gov currency

What about if the citizens of each democratic nation voted to join other nations using the same blockchain?

First, that's irrelevant to the discussion here, which is China's digital currency. The citizens of China are not going to be given the chance to vote for any such thing.

Second, even if what you say comes to pass, so what? If I'm into crypto because of independence from governments, how does what you're suggesting make me any more interested in using that currency?

Because of the pitfalls of Bitcoin and because of the value that comes from trusted centralized services; just because there are existing problems with current governments doesn't mean the ideal or best solution is disregarding them and creating/supporting a wildwest situation.