Bitcoin can not replace Fiat, it helps people saving there value and escaping of controlling from government. Goverment cannot do anything to change and control Bitcoin.
There is nothing in this world which is not possible and that we all know the potential and the capabilities of the bitcoin. I dont think so that there is any such significant reason because of which we can claim this thing that bitcoin cannot replace paper money.
It will take time for things to be settled down in a way they should be but we can really hope to see something which can help us in a better way.