Does it mean no coin hosted on the blockchain will gain mass adoption enough to bypass the users of bitcoin?
No it doesn't mean this. Satoshi, like anybody else, cannot predict the future.
The government own billions of population
This is wildly incorrect. A government doesn't own population. The revolutions have shown this.
Of course, in a couple of countries the revolutions went wrong or they are stull due, but that's an exception, not the rule.
and by setting her face against bitcoin is a competitor
The part you're missing is that the world is made of many countries and many governments which have different agendas.
Last question please forgive me, what stops them from building a coin on the block chain that'll bypass the total sum of bitcoin users, and regulate it?
Nothing. A lot of governments have plans for CBDCs (regulated crap they tried to advertise as crypto). Some are dropping already the plans, some go on with them.
Some tried to make proper crypto too (iirc Venezuela, for example) with no success.
Fiat already is a "bigger success" if you think like that, so Bitcoin still have a great deal to recover.
Making a crypto is easy. Making it successful is very difficult - see the plethora of altcoins, some going ok, most going bad - but not impossible. But if this goes together with regulation, I see no good reason for people to switch from Bitcoin to the new coin. At least not now. And the governments try to regulate Bitcoin. It's the approach that can be easier achieved than making a new coin.
Who is top bitcoin competitor?
Right now, nobody, it seems.
It may emerge in the future, since Bitcoin is not perfect. But for now it seems easier to improve and build around Bitcoin, maybe regulate it too, than start from scratch.