The government own billions of population, and by setting her face against bitcoin is a competitor, but doesn't seem to prove that they're a top bitcoin competitor without having a downward course in the process. 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?
The government doesn't need to build its own blockchain based currency to compete with Bitcoin. A government controlled cryptocurrency would end up being as permissioned and centralized as fiat which already works pretty well and doesn't need to be replaced with crypto. We are already seeing coins like Tether and USDC gaining adoption. Stablecoins don't threaten dollar hegemony, they can be traced easily, and they can be frozen and confiscated. Stablecoins are already a government friendly crypto. This is Bitcoin's only real competition.
It is possible that they could try to bring BTC closer to where Tether is by demanding greater compliance in order to transact with it. Some cryptocurrencies like Zcash have already taken measures in order to keep regulators satisfied. I don't believe Bitcoiners will allow this to happen, but by increasing regulatory pressure it could become harder for people to adopt BTC.