I guess that's the reason why government are not in approval and legalizing crypto because they still want to maintain control, power is toxic and absolute power is even worse, if the Chinese government has such control over it's citizens they wouldn't want to let go so easily, the government know what they are up against.
Yes, accepting the legality of crypto as a decentralized type of money and trading would be for a corrupt/dictatorship to say "here, now we don't have full power over you and your family".
The worst kind of government is the one that centralizes everything. China is such a government. And even a major country that is not a dictatorship like the USA is afraid of crypto because they're afraid of losing power over the people.