I understand and support the Crypto-ATM's, however isn't the whole idea of Cryptocurrency to be paperless and completely electronic? Wouldn't Crypto banknotes defeat the purpose of that?
No. You've misunderstood both what these 'notes' are and the purpose of Bitcoin.
If you haven't already I would suggest reading Satoshi's original white paper.
https://nakamotoinstitute.org/bitcoin/#selection-49.4-49.211After reading the whitepaper from the link that you've provided and reading the original article that the tread was based on, this is what I've come up with:
The purpose of Bitcoin was to eliminate the need for a third party which would entail a certain level of trust.
"What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party." - According to the link you've provided.
Also, with banknotes, there is the possibility of fraud, due to the transaction not going through the Blockchain, as Satoshi originally intended.
"...there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads." - Also from the link you've provided.
From what the original article, from Coingape, states:
https://coingape.com/bitcoin-banknotes-ready-to-replace-traditional-currency/"The notes will be on sale at the Megafash Suntec City store. The aim is to mass produce the physical notes of bitcoin in millions by the end of 2018."it will go directly against the original whitepaper, where the electronic method of transactions was essentially vetted by the Blockchain in order to eliminate fraud.
Perhaps we have both misunderstood, but this is what my understanding is after having read through both the article as well as the whitepaper.