And I will add a point that with physical form of bitcoin the term crypto will be then useless as the physical things are transferred with our hands and then any transfer of coin will be the same as normal fiat and bitcoin is not going to be a fiat but it is a crypto currency.
Bitcoins can be transferred from to hand literally, with physical devices which can be loosely considered as purses, without the need of making transactions through the blockchain. In fact, such devices can be very useful for merchants since they wouldn't need to wait for confirmations by the network. You need the blockchain only to check the balance of such a purse...
And your primary source of risk will be a malfunction of the purse itself