I thought the AdGuard folks were looking doing just that!

partially, but it couldn't replicate all functionally. A lot of uBO rules apply to elements on the DOM. Like hiding a div with ID "#ads". That div often isn't sent as pure HTML, but is instead added to the page via JS code executing. At the MITM-level you won't be able to have rules that apply to the rendered DOM.

That said, selector based ad-blocking is still supported in MV3. So might be possible to get most of the functionality with both a MITM-level blocker and an MV3 selector based blocker.