Bitcoin is a force you as governing authority must accept and respect, because you can't do anything to stop it. The harder governing authorities try to work against Bitcoin, the more people will dive into local markets, which clearly is the case in all countries with harsh regulations. People here tend to think that China is out of the game, but they really aren't.

The local crypto economies there are growing like there is no tomorrow, and the government can only stop it by softening their regulations, and it will happen. Governments have to choose between a decentralized economy that only keeps growing, or one large centralized economy if they open their doors again. The latter will be the most favorable outcome for any government.

It won't. Fiat and crypto currencies will however compete with each other to create a more even playing field, which is something that we have never had before. We were only forced to use one specific form of money, and now we have two options (more if you add other crypto currencies).