There have been a lot of positive steps made lately for LGBT people in the Catholic Church, but it seems we are still a long way from full equality. As of right now, the Catholic Church maintains that preventing a trans man from being a godparent is not discrimination. So I guess not only does the church not want transgender people to be godparents, but it also doesn't even see how that could be a problem. Which is not encouraging.
Alex Salinas, age 21, was assigned female at birth but identifies as a man and lives openly as one; he is even legally considered to be a man by the Spanish government. Salinas also identifies strongly as a Catholic, and wanted to be a godfather to his new nephew, but the diocese of Cadiz and Ceuta in Spain has determined he is not "suitable." Their reason? He isn't living a life that is "congruent with faith.”
"My parish priest had said that there would be no problem with me being godfather, but after speaking with the bishop he said that in the church’s eyes, I was still a woman,” Salinas told the newspaper El Diario. Instead, they told him he could perhaps fill a non-official role of "spiritual godparent."
The diocese, for their part, insists "no discrimination is implied" by the decision.
The dioceses has pointed out that people are often blocked from being godparents due to things like "lifestyle, opinions, and lack of congruence with Christian life and the Church's regulations." And it's true that, since godparents are responsible for ensuring that a child grows up with a strong faith, it makes sense the Church would reserve the right to reject applicants who are less than upstanding. But the key point here is that Salinas is being designated as unsuitable not because of a lack of faith or because he doesn't live a moral life, but rather for simply for being who he is. And when you start rejecting people based on who they are, that is pretty unambiguously discrimination.
Basically, judging someone for their actions is fine. Judging someone for their fundamental identity is not.
The Catholic Church has seemed to be getting more open and accepting towards LGBT faithful in recent years, though their official policies and positions on crucial issues has not changed. But it seems that there is still a long way to go for transgender Catholics in particular before the community is fully accepted and allowed to participate in all aspects of Church life.