1- tor is broken.
2- they know and use ways to get around encrypting. We got to give them some credit they knew encryption was an issue that at some point they had to dealt with. And they found ways to do just that from the beginning.
So, yes, they do need to break encryption. Especially as more and more apps move towards the "smart/encrypted client, dumb server as a storage dump" model.
For what definition of "broken"?