According to the specified requirements, it is necessary to have backups encrypted.

If using Veeam’s native encryption, the repository type that will be impacted the most is the deduplicating storage appliance. This is because Veeam Backup & Replication uses different encryption keys for every job session, which makes the encrypted data blocks appear as different even if they contain duplicate data. This reduces the deduplication ratio and increases the storage consumption on the deduplicating appliance. If you want to achieve a higher deduplication ratio, youcan disable data encryption or use the encryption feature on the deduplicating appliance itself1