They won't much, I suppose, as they are shitty-fiat currencies.
Do you think laypeople understand this? I don't.
There's been a lot of conflation among "digital currencies", "virtual currencies" and "cryptocurrencies." Most dumbed-down explanations and media coverage emphasize the
intangible and
virtual nature of coins and their
lack of backing, rather than conveying why the technology works and why it has economic value.
I think people who know a little bit about why bitcoin was created, and its features, like decentralization and 21 million cap, don't care about state cryptos.
I agree with that. But I also think most people are plebs who don't know what decentralization is or why a deflationary supply matters.
To address the OP: States will issue digital currencies to take the luster away from real cryptocurrencies. They'll exploit ignorance about the technology to get people to ignore decentralized coins. To some extent, they will succeed, but there's no way they can actually
stop the Bitcoin train. Legit cryptocurrencies will continue to flourish.