well it won't affect crypto currency too much, it is just a fiat that being change into digital currency, and the coin is not going to anonymous and it will be centralized, so there is no different with fiat, I don't think it will be successful, the government won't succeed to rule bitcoin down, the user used bitcoin because the user want a currency that free from control
You are right in saying that launching a fiat currency will not affect bitcoin too much. That would be a fact if the country involved is not China. China is one of the country that has biggest hold of bitcoins volume in the world. Aside from having a large number of bitcoin users in the populace and big companies that are in the rich list of bitcoin industry they also have the biggest bitcoin mining farm in the world. It is not yet 100% but there is a possibility that during the launch a big dump on bitcoin will occur and a price meltdown will placed upon bitcoin.
This is not something not to be looked upon to, if only it isnt China but it is. And so a panic and a regulation in China will bring about tremendous and huge effect on bitcoin industry.