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