People would still be using Bitcoin just not on chain.
When the dollar was backed by gold it worked perfectly well and the country experienced its greatest growth.
The difference is - the government enforced a
single currency. In a decentralized system, nobody will.
This severely hinders the utility: by adding a mental effort to decide which off-chain to use and by introducing friction at borders.
You will get the same mess we have with altcoins now, only it will also be even less clear what is securing each individual off-chain.