You actually did not give strong reasons why cryptocurrency can't replace fiat currency. Cryptocurrency can actually/theoretically do most things fiat currencies can do, but I doubt typical fiat currencies can safely do most things cryptocurrency can do with losing their centralization. Besides, government can run their fiats on Blockchain or other real decentralized system.

Crypto could actually work better in rural areas than fiat, even without relying too much on internet. But I believe safe/crypto-friendly worldwide rural internet coverage is a possibility in the future