He is confused about his gender. The blockers keep his body relatively neutral by delaying puberty and keeping its associated changes at bay temporarily, only until he clears up that confusion. If he were to experience the rush of unbalanced hormones, which is what puberty is, and the appearance of more prounounced male traits, it would only make his confusion and stress worse, not better, since those same issues are what caused the problem in the first place. That's why it's better for him to fix his mental health before going down that road.
I honestly don't understand why this is so difficult to grasp. It's not a sex change, and it doesn't encourage a sex change- if he clears himself up and embraces his male body, they'll take him off the blockers, he can go through puberty normally, and his parents will be happy. They aren't trying to turn him into anything. The whole point of this idea is to prevent the kid from wanting to rush into an actual sex change.