Lets assume that starting in USA all bitcoin to fiat exchanges are banned. Will people be still interested in Bitcoins? I believe the applications of the blockchain are many, however, most people are attracted to Bitcoins because of its fiat value (or USD value). Deep under I believe that people are really not interested in the use of bitcoins in a decentralized platform/application but more interested in converting Bitcoins in to USD. Fiat currencies still seems to be the norm. Any ideas ??
Your assumption is wrong. Sure maybe there are people who's interested in Bitcoin only as a speculation tool, but the majority are here for the decentralized p2p payment system. So yeah, people would still interested in Bitcoin. The price may drop significantly because of the ban but people who really believe in the technology can buy much cheaper and will be rewarded in the future.
I find it very unlikely that government want to ban exchange rather than regulating it. You see, by regulating exchange and forcing certain KYC/AML rule, they can earn a huge money in form of tax, from the user and the exchange itself.