As for me Bitcoins high volatility is the main problem for todays crypto and its image in the World, that's what prevents fiat replacing for the current moment.
What do you mean by Fiat replacing? Do you think Bitcoin would replace Fiat? Bitcoin would not really replace Fiat but it will be a diversion of Fiat to crypto in which blockchain technology is the middleman for it. Also, bitcoin's volatility is not a problem but the reality in which we should accept and not just Bitcoin but all cryptocurrencies.