Originally, 'fiat' had the same link to gold as crypto has to fiat. True, for taxes fiat is needed, but it is possible to have a thriving economy without needing access to fiat.

The moment people can start to pay rent and groceries in crypto, it makes sense to accept crypto even if you can't turn it into fiat. As long as taxes are paid in fiat, you need some of it, but that wouldn't make crypto useless.