I'm not sure there's much of a chicken and egg problem at all. The cryptocurrency adoption has steadily increased so far.

If anything the biggest problem is understanding how to use cryptocurrencies in the first place. For mass adoption that's where we need to see innovation most (and of course scalability, which is directly tied to mass adoption).

I don't see the government adopting/not adopting a cryptocurrency affect adoption in a major way on its own. People who don't understand how to use cryptocurrency still wouldn't use it unless it was forced upon them somehow, like their employer saying their salary will be exclusively offered as cryptocurrency from the next month forward. But that could cause all sorts of issues.