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.
because there are several interests that always exist in several countries , the entry of bitcoin to replace the current currency and fiat currency clearly gets rejection from various elements, because for some countries consider if bitcoin is the future currency will greatly affect currency controls for some big countries , the most obvious example if bitcoin replaces fiat and paper currencies like the dollar, it is certain that the American government will no longer be able to dominate the world with dollar domination which has been the most powerful weapon.