This is similar to T5226 and a regression from the unicode changes / using utf-8 internally. Related discussion to this is: https://wald.intevation.org/forum/message.php?msg_id=7685&group_id=11
The only way to encrypt files with an 8 bit character seems to be to pipe it through the command.
I would look forward to an example that explains how you could still use the filename arguments on Windows using CMD or PowerShell. I can't find a way. Even when you use CHCP 65001 it only changes the output / display but not the input of arguments.
To reproduce just create a file täst.txt and try to encrypt it on the command line.
Maybe for 2.3 we could try to solve this by adding a wmain?