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From iOS Settings App:

Private Relay hides your IP address and browsing activity in Safari and protects your unencrypted internet traffic so that no one-including Apple-can see both who you are and what sites you're visiting

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Encrypted safari traffic goes through the relay.

Encrypted safari traffic is an exception. But encrypted app traffic does not.

They made it a few years ago they all apps had to use encryption. Long before private relay came out. I have wondered if this was why.

Agreed, we can only speculate; personally I would be surprised if that was the "long-term" plan instead of just a push at the time to enforce industry best practices on its apps. My hunch would be such a move might be disruptive to certain apps (banking?) and they are allowing more time before tunneling everything, but this is just a guess.

See my other comment about how iCloud Private Relay works. There are basically almost no security measures that prevent you from using it with other apps. This leads me to speculate that Apple intends to eventually enable this globally, so they don't really bother now with trying to lock it down too much.

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