You're not missing anything. The problem with the law is not it's intent, it is how it will be defined, interpreted, and applied at the judicial level in Canada. Trans people in Canada didn't even want this law by and large. The majority leftist and SJW contingent in Canadian society are the ones that pushed it. They are also wrong about not being able go to jail. If you want to see what a regressive leftist social justice culture looks like, you should read about the provincial Human Rights Tribunals in Canada.

What stops a cis-gendered Christian male from simply identifying as demisexual for equal rights? All of a sudden the labels are meaningless. One cannot legislate away offense, and it undermines the emotional development of an individual to be protected from such things.

This is the flaw of liberal thinking, that if you just design the perfect system that you can solve the problem. And that is fundamentally contrary to Christian belief, as fallen beings cannot design the perfect system, nor can they operate perfectly within it.