They block it outright, even when the purpose is innocent (sensitive documents). Tried with rar and 7-zip.
Not endorsing this, btw, I much prefer dumb pipes.
... so it has no utility at all, since you definitely shouldn't be storing any unencrypted files on it.
As another data point, I have several manually-uploaded zip and 7z files of my own documents and content, both encrypted and not, and never had a problem.
The majority of my Drive usage by bytes is encrypted backup pack files uploaded via API by Arq Backup or rclone. That's all worked fine for many years.
GMail also complained about direct-attaching a locally-built, unsigned exe file to an address that I'd never corresponded with. To be fair this probably should have caused suspicion :)