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.
I agree with your opinion, indeed if every Government has their own coins to trade then it will be the same as the currency of where each country has their own currency and value. and it will kill the coin which is growing, is ultimately a bitcoin be strong