It seems like adding an encryption/decryption step might be an easy work around.

I do wonder about this. Google AI Ultra subscriptions come with 30TB(!) of Google Drive storage at no additional cost. Aside from people who do a lot of video editing or want long backups of home surveillance videos, who has that kind of storage need for completely legally licensed content? I'm sure there are some data hoarders out there. But if I were going to back up my NAS to Google I'd sure as hell use a backup tool with encryption, completely negating the ability to use the files natively in Google Drive.