If governments start to actually fear that their monopoly on creating currency is in danger, they will destroy crypto currency.
Bitcoin may be decentralized, but they can go after currency converters. They can make holding it illegal. They can make mining it illegal. They can make trading it illegal.
They can manipulate the market to crash the value of bitcoin with (to them) pocket change.
Only in their own jurisdiction. The US already goes after those, but it won't help as long as other countries don't.
> They can make holding it illegal.
Unenforceable. Making the knowledge of a secret key illegal would simply be weird. Bitcoins have no physical incarnation. So, you cannot "hold" them in your hand.
> They can make mining it illegal.
Unenforceable. It is very easy to hide that a machine is mining. Furthermore, such machines can be located in any country of the world.
> They can make trading it illegal.
They already try to do that. It doesn't help.
> They can manipulate the market to crash the value of bitcoin with (to them) pocket change.
They would first have to buy up a lot of bitcoin in order to dump them and crash the market. While buying up the coins, they are pushing its value up. When selling them, they just go back to the point they came from. Hence, the strategy would be totally ineffective.
What's more, if governments attack the internet, people will discover that the reverse is much, much easier. Using the internet to orchestrate attacks against the government, is simply trivial to organize.
Bitcoin may be decentralized, but they can go after currency converters. They can make holding it illegal. They can make mining it illegal. They can make trading it illegal.
They can manipulate the market to crash the value of bitcoin with (to them) pocket change.