I agree with your thoughts about the current state of the "digital" fiat system. Crypto Currencies are are light years ahead as they are founded on new and advancing technologies while the old money is built on a decaying infrastructure and is far from secure, trustworthy, and sound. There's a reason they decided to quantitatively ease so much "money" into the system during the 2008 financial crisis... They treated the money they issue like the trash it is because something better is making it's appearance.
The younger more technical generations are not going to trade away their lives for the trash they printed... And that's why it's going to be a wealth transfer... from the financially unsophisticated to the people holding the new medium of exchange.
I think that it is this very reason that the world will become cashless... It will start as a way for the government to simplify and trace money moving into things like Bitcoin. We already see this happening... As an example, on Coinbase they are no longer allowing people to link their credit products to buy crypto. This acts as a bottle neck and slows down the exodus into the new forms of money while also protecting their interests. The next logical step in slowing down the transition from old money into new money will be the elimination of cash from the system... I believe this is only going to bolster privacy coins as crypto currency navigates the waters of regulation in the coming years.