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Soo, how do you handle this on the client?

If wiretapped, then dummy_encrypt(message) else encrypt(message) ?

Or will they just dummy_encrypt anything and read the stuff that's "wiretapped" at the moment? Because that sounds way more probable.

If it's E2E except when it's not then it's simply not.

How do you assure that the people flipping the toggle are the 'good' guys.

Given the way five eyes (and similar groups) have behaved particularly.

If your connection can be tapped it is not end-to-end encrypted, obviously. If it is possible for anyone to tap into your communication it is not encrypted (properly). What you are saying makes no sense. Either the channel is encrypted and safe from being listened in on or it is not. You cannot have both.