Bitcoin is virtual yes, but having no physical form is not the main reason on why bitcoin can't be fiat. Remember that bitcoin is rooted in USD, and USD is rooted by precious metals and minerals. So they are just the same, bitcoin is a virtual coin that has no value at all until it was rooted by fiat. Same as fiat, fiat is just a paper print or minted coins that has has no real value, until it was rooted into rare Earth elements. Both has the same principles upon having value and price. Demands, supplies, reserves, influences, and more. So bitcoin can replace fiat in terms of market usages like buying, selling, saving, hoarding and more. The only thing that is quite impossible here is the bitcoin on being an official currency of a country because of many crazy rules, laws, and regulations must be applied that you can't really apply in bitcoin.