So at the end, not all kinds of acknowledgement is good.
If we look at original idea proposed by Satoshi which is P2P electronic cash transfer, the idea eliminates the need of middle men (i.e. the banks) to transfer funds between two entities. The government legislation's are putting the middle men back in place and that destroys the idea proposed by Satoshi. The government approved cryptos are CBDC, which they can control.
We need to understand that decentralised Bitcoin has it's own use cases and is not designed for governments to use as central currency.
I do not think the initial plan was to make bitcoin replace fiat currency. It is not just possible since fiat currencies are always controlled depending on the needs of a particular country's economy. A lot of people have liked bitcoin so much to the point that they are wanting to make bitcoin the only currency and replace fiat but this would not be possible. Fiat will always exist and bitcoin can co-exist with it offering an alternative way of transacting with others.