Indeed everyone holds non-local currency too. I'd presume USD and/or EUR have taken on the role of "store of value". I lived through collapse of a state 30yrs ago, and exactly that happens: locals refuse to hold the local currency (that reflecting on the health of the state is quickly losing value), there is a vigorous fx exchange market (either white-legal, grey-tolerated, or black-illegal but existing), and locals exchange their savings from local to foreign fiat currency. No one ever used gold, not once I saw gold being used for anything. Nor any other commodity. Foreign fiat currency that is stable is much more practical and convenient. Until BTC is as convenient as a credit card, can't see it used as "means of exchange". As store of value - maybe, but foreign currency maybe again more stable less risky (on humant time horizons), so again wins for that too over BTC. Sorry for the spoiler.
How would they hold bitcoin to begin with if they need to pay for local services? How would they get paid in bitcoin, or do they need to convert their funds to bitcoin ahead of time? In such a case they could’ve easily picked USD instead.