I don't know who defined this originally, but the six characteristics that money needs to have are durability, divisibility, portability, acceptability, limited supply, and uniformity. Additionally, money needs to serve as a store of value, a unit of account, and as a medium of exchange.
Fiat currencies do not have a limited supply and are therefore not a store of value (i.e., inflation constantly lowers the value of fiat currencies). The main reason that fiat currencies are still used as a medium of exchange is for the exact reason you mentioned: governments mandate their usage to pay taxes.
As an example, gold and silver have been used as money for 1000s of years because they meet all of those requirements.
