Specifically, they are grappling with the following three problems presented by Bitcoin in its current form. Bitcoin can circumvent government-imposed capital controls. Bitcoin is ties to illegal activity. Bitcoin is not regulated. All this are the major concerns of government not wanting bitcoin in circulation.
That is correct. If you recall, Julian Assange utilizes Bitcoin since the government has prohibited the use of MasterCards and other forms of payment so that Wikileaks may continue to operate. They can't stop people for doing transactions with Btc and they cannot trace who's the person behind that transaction, there they can't identify if someone uses Bitcoin for illegal activities. So Julian chose Bitcoin because it is not governed by the government as a result Wikileaks was still active at the time. That's why in my opinion, government don't want Bitcoin.