If it's something made by the government or by banks then you should definitly know that it won't be private and they will have control of everything just like the banks right , nothing much will change .
and for what comes to the Paper money I don't think it will dissapaear , maybe on some countries yes but worldwide ?definitly not because some countries don't even use Credit cards for their transactions so ... yep
yes you are right, and besides if government took part in bitcoins that will be the chance of the government to control bitcoins therefore we are to expect more hassle in using bitcoins and might be the downfall of crypto currencies. paper money though will still exist through out the world since most of the people preferred to use paper money especially the older ones.