I have a feeling it just means if it detects the drive is encrypted it will allow it or block it (depending on what option you pick). It won't actually decrypt the drive.
this has nothing to do with the XG. It's the Endpoint's Peripheral Control.
Secure removable storage refers to (supported) storage devices with built-in hardware encryption. Normally you'd use this device category to permit only secure storage devices (i.e. devices that enforce encryption so that the contents can be considered reasonably safe in case the devices is lost).
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