Why is paper money made of paper?

Answer 1

Paper money is lighter and more compact than metal coins, and its flexibility makes it easy to store and carry. Paper can take a more detailed engraved image than fabric can; the difficult-to-reproduce detail in the engraved image has historically been the primary safeguard against counterfeit paper money. A high-quality paper is more durable, and takes a printed image more permanently, than most other natural materials of a similar thickness and flexibility (such as papyrus, bark, or parchment). At the time paper currency was adopted, plastics that could accept printing and would have the necessary stability, flexibility, and durability had not been invented; some countries are now experimenting with plastic folding money.

An earlier answer stated that US currency is not made of paper; this is incorrect. US currency paper, like many high-quality papers and all Western paper prior to about 1850, is not made of wood pulp, but of a combination of cotton and linen. It is not the origin of the starting material, but the formation of sheets from a suspension of cellulose pulp in water, that makes paper paper.