Fiat currencies definitely aren't necessary, there is an increasing trend towards digitization of currency, and blockchain based currencies are just the next generation of this. The problem is that Bitcoin came out, and everybody treated it as the successor to fiat currency, rather than an incremental improvement on digital currencies such as Paypal and Skrill. I think that if Bitcoin was never invented, but somebody like Paypal had implemented a blockchain technology first, then we wouldn't be in the rivalry scenario that we're in now.
If I am going to compare it now in our generation my answer is Yes! Fiat still needed now because crypto currencies is only useful because of the internet we had it now but without it, it will be useless for sure. Although blockchain was very trending nowadays due to the high technology we have so far, that's the fact reality which I saw its true happens.