Crypto will definitely replace conventional paper money. Every government is already investigating it. Govs will have their version which will suck but then we will have our real money crypto like bitcoin.
If every government starts their own coins to trade then it will became same like fiat currency where each country have their own fiat currency and its value. So i think this idea wont work and it will only kill the coins developed and in the final Bitcoin will only be their to lead it.
They might use bitcoin as their basis,when they make such coins they might use services,types and form of bitcoin,so in the end it will only be like bitcoin and will still continue to acquire btc.