Japan regulated/legalized bitcoin and India is going to. I am not able to comprehend how the current situation would be anymore different than regulated because right now I am using bitcoin in India like it is regulated, taxable, strict KYC/AML and even after regulation it would be the same. Almost all major exchanges follow this same procedure. Regulation means the banking system of a country enforces some strict guildelines on bitcoin related websites, mostly exchanges and officially accepts bitcoin as legal. Even without regulation almost all governments are still unofficially imposing currency/asset related regulations on bitcoin.

As far as decentralization is concerned, I do not think regulation would have any serious impact on it. In fact, I do believe it is necessary if bitcoin needs to be recognized globally. Even after regulation, it is not like any government gets control over bitcoin. Bitcoin would still be independent as a currency in the sense that it is not issued by the banking system.