Back when Bitcoin first came out, Casascius coins tried to create physical coins out of bitcoin and was hammered by the "authorities" for "money transmission". Now the idea of physical currencies out of virtual currencies is no longer an option.

So, yes, it is highly suspect that Bitcoin's been allowed to grow... only as a virtual currency. However, not enough people Trust computers or their phones for privacy or from hacking. So, I doubt they'll be able to expunge all the physical currencies along with gold and silver.