Government all around the world wants to control their money. They wanted to know everything about their currencies, how much people were saving, how much they were investing, how much they were remitting and so on. But with the cryptocurrencies, they cannot do it. The government has full authority over the money supply and thus can increase the supply whenever it wants.
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Also, the government mainly relies on the trust, that the fiat currencies will be a trusted way of exchanging hands. The sole purpose of cryptocurrencies is that they want to remove Government supervision on the money. Since the government can create a lot of money thus value of it gets less with each passing day. The cryptocurrencies on the other hand have limited supply (mainly Bitcoin) the value of it doesn't decrease and will increase in the long run.
The government is also wary that the cryptos are mainly used for illegal activities and with that they cannot track the money chain. Since there is no identity in Bitcoin criminal activities are taking place using Bitcoin only and thus the government has a hard time identifying it.
But the problem is that the government cannot run away with it. They have to come up with the regularization and other things because cryptocurrencies are here to stay. Like in India, Government has first banned crypto and then imposed a profit tax. Now they are asking all the information from the exchanges to know who have how much crupto with them so that they can actually regularize it.
Similarly the US has given green light for the Bitcoin ETF which again a good step towards helping people to invest in the crypto. Like now using the bitcoin ETF I can invest in Bitcoin without even thinking of opening a crypto exchange account and other things.
So the government has to pit efforts to use cryptos for their own good and help people to gain advantage of it.
