Governments frequently misunderstand bitcoin innovation.
This impression arises from the disproportionate bans and regulations they enact.
Although occasionally the bitcoin regulations appear unreasonable, I posit that bitcoin is not as detrimental as suggested. Please correct me if I am wrong.
I think you are wrong. Government don't misunderstand Bitcoin or the concept of it innovation, but due to the inability to control Bitcoin and it decentralized nature, is the reason why they dislike it. Another reason is that they see it as a scam attempt to defraud many people since it has no account number like bank which you could easily trace people ACC and their activity and also correct some issues. but in crypto currency if a Bitcoin is lost to a wrong wallet it will be difficult to reverse and if it's large fund , you wouldn't be able to reverse it.
Yes, governments are unable to control it, which is the main reason why bitcoin usage is restricted in different countries. There are few governments around the world that have seen the better side of bitcoin, and they are positive about it. As a result, countries like El Salvador have begun to consider bitcoin as a legal tender. Based on this, we can conclude that governments don't misunderstand it, but they want control over it.