A paper wallet can be traded as bitcoin, and hold its value as bitcoin until redeemed.
I've done that, but it only works with people you trust. It's the classic: "not your keys, not your coins" problem where you can't ever be sure you're the only owner.
The objective is tradable BitCheques with the private key accessible only to the holder.
My point is: the holder can't possibly be sure he's the only one with access.
Requiring 2 of 3 signatures to redeem them (the holder, the issuer, the arbitrator selected by both) is another possibility.
Nope, it doesn't solve it. You want the paper wallet to be tradable, but now know for sure the issuer and the arbitrator (selected by someone else!) can take your funds.
Or the issuer could escrow the BitCheques up to the maximum amount on the BitCheque for a limited time - governed by an escrowed smart contract - at which point another BitCheque could be issued if any doubt remains.
"Smart contracts" usually mean nobody understands the details.
On the Collectibles board,
Casascius physical Bitcoins are often sold. The creator was (and is) highly trusted, but
fake coins are used to scam people. Once it's something physical, counterfeiting becomes a problem again.