I think fiat cannot be replaced with crypto and that's the reality.Right now we see that digital money is important because of the virus but time will come when it's over, everything will return to normal and we will use cash again. I agree if fiat collaborates with crypto for a better future in financial system, that's great.
I tend to agree with your position overall - crypto can't replace fiat, not now at least.
However, I am not sure that there will be distinctive moment when everything will be "normal" again.
Chances are we're building new normal now and blockchain/crypto already sort of inlaid in our economy