Protectionist policies only help domestic industries at the expense of every single other person in the country.
I think your analogy to bitcoins is flawed though.
If a government institutes protectionist policies for a particular industry, automobiles for example, people are likely to continue to want to drive cars.
With bitcoin, people can simply choose not to use them if the barriers to entry are too high. (paypal blocking payments, governments banning them)
If people chose not to use bitcoin the value will drop to Zero, but they will still want to drive cars paid for with dollars.
Exactly.
I only use bitcoin, because someone (ie: people at BCM) still accept PayPal.