But why would the type of person who only uses regulated currency see any difference between regulated BTC and regulated fiat?
You can see the difference between exchanging freely and not. Regulation isn't completely detrimental, it can also offer you protection.
There would be no reason for them to substitute their fiat for BTC, right?
They occasionally have the desire to do so, only a handful because they have never experienced a technical fiat failure in an urgent situation (this really happened in several crisis countries).