Of course they are scared. One of the main pillars of any state is a single currency and full control over the money issue. Crypto destroys both of these postulates. From this all the ridiculous popts of regulation of the market will emerge.
Government thinks that maybe it will harmful for people and users will go to wrong way, so that's why government is really scary but they will very soon accept this currency because it is providing a lot of benefits to many people and that's why it will improve the economy of a country.