I just thought this morning if I were the government of say, China, what would I do when faced to the threat to monetary sovereignty posed by bitcoin?

  Then it hit me-

   I would do exactly what auroracoin recently attempted to do- create an altcoin where half of the coins are pre-mined, secure them in government controlled wallets, except I would then do some massive fines and high profile arrests on anyone dealing in a currency other than that one, thereby causing demand to skyrocket and keeping me in power.

    All of the advantages of cryptocurrency are thereby co-opted- it's like a pump and dump scheme, except that the pumping is done using the government monopoly on violence. Bitcoin would be relegated to the shadow economy.

   This is essentially what was done with the US dollar- the pump was territorial expansion Mexican, Spanish wars, and the World wars. The dump is Viet Nam, Gulf war, war on terror.

       I guess the risk would be a 51% attack from other countries would be possible, but the coin could be designed so that the ruling party always controls 51%.