Governments can block development by hindering cryptocurrency trading, but will never penalize developers for creating a new coin or token.
Logically speaking, if there is no market to invest into a project there will not development of that project. So this combo is less likely to happen. If you ask me, I know that the governments are fond of startups and they are willing to promote development of new projects and if the governments are willing to regulate trading then it is all for the good, unlike what some people might say.
Regulation is inevitable, it may be difficult but will happen instead of outright banning which again logically is not possible.
We have already seen governments supporting blockchain technology and using it for the services provided by many companies including banks.
The rate at which new projects are chuming out on a daily makes it difficult for new users to pick quality projects from fake one. it is difficult for one to separate quality tokens from fake ones. it appears that we might get to a point where crypto will be regulated to reduce the high surge of new worthless projects. from NFTs to Gaming platforms. some has no serious values.
Which I agree and which is also why regulation is necessary. Partially the users are also to blame because they feed such things to happen more. But yes a government backed regulation will go a long way too.