Bitcoin is a peer-to-peer currency exchange system. In its simplest form, it is supposed to give two people the freedom to exchange value without depending on a government to "regulate" it. Ideally, it shouldn't matter whether countries "accept" is as a form of payment or not. the problem is that the ground reality is very different from ideal.

Normal people are putting their savings and money into bitcoin. This is taking away a lot of "government's money" into a parallel economy that governments seem to have no control over. This is too much power in the hand of the masses for governments to be comfortable with it. Their approach then is to outright ban trading etc.

The dilemma is that the system will not have wide acceptance without some sort of legitimacy. A lot of new people care about legitimacy/ regulation because they want to realise their gains in fiat which is natural and understandable. Enabling easy fiat to crypto change will be necessary for wider acceptance but that also opens the possibilities of bitcoin being manipulated. The market manipulations and volatility also confirm that some form of regulations will be necessary.

Another dilemma is that while some people want governments to intervene so that new investors don't get burned, governments want to get involved so that they can contain bitcoin and its far-reaching benefits.