ever since the interest by government and institutions I feel we are losing on decentralization and privacy.
No, bitcoin privacy does not run by who is adopting it or how they are accepting it, be it institution, government or private individuals does not determines bitcoin privacy, this is what determines bitcoin privacy.
I think you don't get what @OP is concern about. I agree at the current state Bitcoin network is full decentralized, @OP's concern is what if the government pressure the developer to put a centralized protocol to Bitcoin network. I can't deny that it is highly likely to happen when the government is fully into Bitcoin.
We know that the government wants to control, so when the government is heavily invested in Bitcoin, there is a possibility that they might require the developer to make adjustments for them. We can take this as an example.
snip
Today a lot of hashrate is concentrated in the USA and the US based miners are ordered by the US government to attack one of the main principles of Bitcoin by censoring transactions, and yet nobody is concerned about it! You don't even see any topics on this 24/7 attack anywhere!
I dare say that it is not about the people not caring about these things anymore but it is that they don't even understand the problems to care about them!
In any case, Bitcoin is still the most decentralized payment system but centralization is slowly creeping in...