We need a service that converts fiat close to government distribution/theft

[Elwar]

The next closest thing to a government declaring Bitcoin as a currency would be if the entry/exit for that government's currency had a third party service that converted from government currency to bitcoins.

For the theft part of government, imagine paying your taxes in bitcoins. This would be fairly easy for a company to take bitcoins for your tax payment and convert it to government currency to send in.

On the distribution part you could have a company that accepts government checks and converts it to bitcoins for companies and people.

Once that happens, the rest of the economy has no reason to still use the government's currency. Everyone can use bitcoins because they are neither required to convert it to pay their taxes and if they are receiving funds they can get it in bitcoins.

The closer to the source the better. Right now, in the US, the Federal Reserve fills this role with the Treasury. If Bitcoin could be converted for everything going in and out of the Treasury then it would be as close to adopting Bitcoin as the national currency as possible. Switching over would not be that big of a leap.