The major difference between bitcoin and fiat currency is decentralization. Fiat money is issued and controlled by the government while the bitcoin is fully decentralized, free from government control.
And that same reason why governments are holding the fact that crypto is helpful but they hinder the adoption because not like fiat the have full control while in crypto they dont(but there are some centralized as well that they can hold in necks)
The basic reason why government are still so skeptical about cryptocurrency and may never go against it fully is because it has lifted lots of burden away from them, people now see cryptocurrency as something that could create job for them which indeed created job for a lot of people and you cannot imagine the amount of burden that this has taken away from the government and through this also, government is still able to generate more revenue through tax on trades via cryptocurrency.
Government would rather just prefer to accept it that way than to accept it as currency which is why they don't want to give in to regulation yet because once they do, it will send a strong signal that it has been accepted by them as currency of the world which they dont want any system that they cannot control.