Many states have already legalized the crypto currency, but made it property, not a means of payment. But this did not affect the work of bitcoin. Difficulties in working with crypto-currencies arise only in those countries that have banned the use of crypto currency.
This is the reason why there would always still be demand for fiat until maybe we get to start seeing real life usage and even at that, it does not necessarily mean every part of the globe will immediately just switch to cryptocurrency, and even if they do, the government with some regulations in place will still always benefit from it, and so at the end, it still remains a win-win situation for both the government and the users. They might feel threatened, based on the idea of control, but we all know there would always be a way around one way or the other.