If everyone has their own currency then it will be very bad with the economy of a country even very bad for the world economy because people are shopping or doing transactions with their own currency so that currency is no longer valuable because there are too many currencies circulating in a country.
It may happen. For now, Bitcoin remains the most popular non-centralized virtual currency, but there is no guarantee that its position will remain that way. There's already another set of coins inspired by Bitcoin. It may be assumed that significant development will be required by the new currency to take over Bitcoin in terms of market-building ability; although this remains unpredictable. Bitcoin may also be able to adopt the development of rival currencies, as long as it does not change the underlying basis of the protocol.
Nothing will happen. Are we even supposed to be having this conversation ?
You think if you have a coin right now with no value or a solution it is solving, I would want to accept it ?
Moreover, you think the government will keep watching every tom, dick and harry to keep creating their own coin or token however they like. You think your coin will be listed on any exchange ?
You would as well create your own coin and keep it all to yourself until you realize something like this can never work. This cannot happen, and as time goes on regulation will cause most shit coins in the market to even get scrapped.