You can identify however you like in the game and dress however you like. If you want to have female features but want the players to see you as a male, you can and visa versa. So what is your point?
I think that they want the word Gender removed from the GZ choice menu, because they think this can lead to the misinformation that gender and sex are synonyms.
Maybe the best thing games studios can do is to use pictures to choose from the characters from.
A picture of a Male and a picture of a Female.