Can a SmartCard actually act, physically, like a paper bill?

An important concept, and yes. Start with the actual paper, Print on it with old powdered wig people and government buildings, in green.. Except the printing proess leaves a flexible LCD in the corners for display of the bill denomination.  Get the chip itself in the paper center, but you cannot fold it. And there, you have it, the intelligent, degenerate, paper bill in a nearly complete duplication. You can actually swap it out with others of its kind, if the banker programmed it so.  Or you can use it just like any smart card; peer to peer exchange. In this case its entire user interface is paper bill based. You get the 'Fold Interface'