If you live in any country (say the US), and engage in economic activity, and never acquire the local currency, you WILL go to jail for tax evasion. At some point, you need to acquire the local currency to pay your taxes, otherwise men with guns will put you in prison. Fiat currency's demand is underpinned by this.
You have also conflated demand deposits and currency. Demand deposits are usually worth the same as currency, and it is true that this is because of confidence. However, there have been several times in the last century in the US (and many other countries) where that has not been true.
If you think bitcoin is anonymous (or mostly anonymous, whatever that means), I have a bridge to sell you. Bitcoin is taxable (meaning that transactions in it are taxable events). I can guarantee the IRS (and probably the FBI) have developed (and are developing) some neat little analysis tools.
It always pays to remember that despite the huge number of crimes committed by Al Capone, he was only convicted of evasion of federal income tax.
My prediction is that BitCoin will become so heavily regulated that it will end up being more expensive to use than USD for international transactions; more expensive because there will be lower volumes. Not using the regulated channels will result in heavy fines, or men with guns putting you in a metal box.
Sell me that bridge. Identify the bitcoins I've used. Perhaps you'll succeed in finding some, but I don't think you'll succeed in finding all.
Cash is taxable too. I've paid plenty of taxes when using bitcoins, and unlike many other bitcoiners, I actually think taxes are a great thing. I don't think bitcoins' near anonymity have anything to do with evading taxes, anymore than paying with cash at the grocery register is enabling me to avoid taxes.
I don't want to make any predictions for bitcoins. I don't know if they will be heavily regulated or not. But so far, it has been very convenient for me to have internet cash.
All currencies are "virtual". They all exist because we agree they exist. They're all a consensus reality. Due to the banking system, most USD exists merely because banks claim they exist.
The point of bitcoins is internet cash. They are frequently compared to credit cards because that's what we mostly use right now, but bitcoins behave a lot more like cash. They are mostly anonymous like cash, mostly irreversible like cash, instantaneous like cash. You can't whisk away coins and bills on the internet, you can't use credit cards without identifying yourself completely, you can't use any other currency on the internet without a 3rd party's permission.