Director Gareth Edwards could have recast the character – actor Peter Cushing having died in 1994 – but instead had his likeness replicated through VFX.
Grand Moff Tarkin, the eventual Death Star Commander in the Star Wars timeline, was such a key figure during Rogue One’s setting that he couldn’t just be ignored or mentioned in passing.
Edwards told the Radio Times with regards to Tarkin, and I think the answer is probably that you do re-cast the role.
No matter how good a job the new actor does, there’s something exploitative about having your exact likeness used.