It has less to do with China's theoretical alignment ("communism") as it does with the challenges to state financial controls, and in turn, China's economic model, that bitcoin poses. Bitcoin is a very useful tool for evading financial and capital controls, which is problematic for an economy with a) rich people trying to cash out and b) a growth model dependent on policies that artificially increase savings rates while minimizing the number of places regular folks can store their wealth.

Basically, China wants artificially high savings rates and for people to keep their cash in state-connected banks, which keeps the supply of money for investment high, because this is baked into their growth model. Bitcoin undermines that.