Theia is using monaco. But there's other reasons for Theia too like the governance of the project, vscode is controlled by Microsoft and they may have conflicts when lets say some feature would compete with their visual studio offering.
There's two versions of VS Code, the "official" one and "Visual Studio Code - Open Source", and the former contains proprietary bits that are kept that way so other people don't use it to compete with VS.
Project Rider from JetBrains accidentally ended up including one of these bits unaware it was part of a proprietary license and had to remove the functionality that depended on it (CoreCLR debugging), later writing a new implementation to put the feature back in.
Although it's not a core component of VS Code (although, one time it was bundled, probably) rather it's something provided through proprietary C# plugin and additional download.
Theia wants to be free from those problems.