This idea comes from Modern Monetary Theory (MMT). Most mainstream economists do not agree with it. But the MMT claim is that at base, people only need USD because it’s how taxes are denominated. The notion is that without the driving force of compelled taxation, no one would use USD or other sovereign currencies. MMT also claims, through similar logic, that a monetary sovereign can print an extreme amount of currency without causing inflation. Which MMT’ers use to justify massive government spending programs.
The idea isn't exclusive to MMT. Critics from across the spectrum recognize that taxation supports the USD. Buttresses such as legal tender laws, the petrodollar system and other barriers serve to support the USD.
Tally sticks are an early example of monetized debt as a taxation medium.
The words “extreme” and “massive” are subjective. MMT claims that the best way for a monetarily sovereign government to maintain aggregate spending at full employment levels is to hire anyone willing to work but who cannot find work in either the private sector or the permanent government sector.
Also note that the work of legal historians such as Christine Desan who are not affiliated with MMT economists concurs with this analysis.
Also note that most mainstream economists do actually agree with the tenets of MMT when individually stated but base their disagreement on a deliberate misreading/misstatement of MMT which they then proceed to criticise.
That taxation is sufficient to drive demand for a currency is not contentious, that it is necessary is unconfirmed.
