Government can create their own cryptocurrency. But i think they create it not to replace fiat but to have another ways to pay or buy good using cryptos. So people can choose what they want to use to pay bill. Fiar or crypto.
I agree with your opinion, and I believe that virtual currency that created by the government and the decentralized cryptocurrencies can even coexist because it is the people who will make the choice. I believe that cryptocurrency can't easily replace fiat or a national currency because it is also created to represent a country. The government always have the final regarding the role of cryptocurrency in the future.