Earlier quoted context omitted.
Encryption is only a legal defense for Mega and their partners, but i'm really waiting to see how the Dotcom campain will change after the first bust
I believe encryption will buy them some time until the law catches up, then poof.
The issue with file lockers is this: The service that actually hosts the file doesn't know what it is. It would be totally impractical for e.g. YouTube to preemptively screen all uploads for infringement by hand. It's just not economically possible.
So YouTube has a lot of infringing stuff on it. They also have a screening system which does fingerprinting etc., which keeps a lot of infringing stuff off (and also keeps plenty of non-infringing stuff off when there are false positives.)
But you can't even do that when your service is general purpose rather than specific to video. You don't know what a password-protected RAR archive has in it, you can't fingerprint it. So there is a ton more infringing stuff on the general purpose sites. The file locker takes it down as soon as the copyright holders identify it, but then the infringers just upload it again in ten minutes.
So you say, go after the uploaders. Okay, they're in non-extradition countries or are using anonymizers. Now what?
There are two fundamental facts that make stopping copyright infringement extraordinarily difficult: First, sending bits is very, very much cheaper than identifying what they represent and whether it's infringing. Second, normal law-abiding people have a legitimate interest in the privacy of their communications. In other words, good people need the same encryption that bad people abuse, and even if they didn't, there is too much volume to economically sort it by hand anyway, and the algorithmic methods are unreasonably inaccurate. (See: huge list of all the stupid nonsense YouTube ContentID does.)
So we have a problem without a good solution. What law do you propose could fix it?