Well, that scenario would only happen if the government is already knowledgeable enough to play within the Cryptocurrency Industry but as far as most users can see, its not happening within the next incoming years. However, if a project failed that is completely reliant on banks and the government, it would really turn into something bad which can affect this Industry.
governments dont play in the finance industry. they give that game to a separate organisation which is central and commercial banks. even you subtly recognise the separation by saying 'banks AND government'
so getting back to the topic.
if BANKS want to be involved in crypto heavily they would lobby/bribe government to make laws that help monopolise crypto into banks favour
if BANKS dont want the crypto as competitors and dont want crypto in their asset list they would again lobby/bribe government to outlaw crypto
but using the scenario of favouring crypto assets as this topic deems. we can all look at the gold history of the last 100 years to see what could happen if banks had 90% of circulation.
what happens is banks set up services where normal people can vault up their assets into management of bank services. and in exchange banks offer them tokems/promisary note to play around with under the guise that its too expensive to handle the underlying asset in normal peoples own hands.
then they start substituting out the tokens via diluting the value via sub divisions of the asset and then when the time is right declassifying the like-for-like settlements if people chose to truly exit the bank service token and return to holding the real asset.
LN factories that do "offchain settlement(close:reopen channel session) are basically bank accounts of promisory note credit
enjoy