Server-side encryption not encrypting on 25.0.3

Nextcloud version (eg, 20.0.5): 25.0.3
Operating system and version (eg, Ubuntu 20.04): Debian 11
Apache or nginx version (eg, Apache 2.4.25): Apache2
PHP version (eg, 7.4): PHP 8.1

The issue you are facing:

Is this the first time you’ve seen this error? (Y/N): N

Steps to replicate it:

  1. Go to index.php/settings/admin/security
  2. Click on Enable server-side encryption and also Encrypt the home storage.

The output of your Nextcloud log in Admin > Logging:

Nothing is added to logs.

I don’t see any errors, the encryption is enabled. I logged out and in, then I went to the fileshares where the files are stored and nothing is encrypted. What am I missing?

My understanding is server side encryption only applies to external storage.

This is exactly the problem, I have external storage I mount via NFS and when I look there nothing is encrypted!