Earlier quoted context omitted.
> just talk to each other using wiregaurd by default I don't understand why you'd want to do this? I use wireguard to join machines on disparate networks into one. However to do it inside the same VPC, I just don't get. If you don't trust your VPC surely you need to be moving off the cloud?
I agree with your viewpoint but I'm also aware of several security standards that explicitly specify all traffic between hosts needs to be encrypted. Sometimes it's easier to meet the standard verbatim than try and justify an exception. If you already use a configuration management tool it shouldn't be a lot more overhead to install some certificates.
Further, leaving your VM, you hit a shared NIC and network cables, so you start to worry about phyiscal layer attacks.
Amazon specifically states they handle these issues, and indeed they likely do, but how do you know? If you're able to easily encrypt by using something like istio, then why not?
More specifically:
"Packet sniffing by other tenants: It is not possible for a virtual instance running in promiscuous mode to receive or“sniff” traffic that is intended for a different virtual instance. While customers can place their interfaces into promiscuous mode, the hypervisor will not deliver any traffic to them that is not addressed to them. This includes two virtual instances that are owned by the same customer, even if they are located on the same physical host. Attacks such as ARP cache poisoning do not work within EC2. While Amazon EC2 does provide ample protection against one customer inadvertently or maliciously attempting to view another’s data, as a standard practice customers should encrypt sensitive traffic."