The only reason I can think of for this change is governmental pressure. I don’t see how it benefits the platform itself (nor its users).
I can think of a few reasons why a company built on profiling (and advertising to) user interests might be interested in the private conversations of their users
I can think of some. Less code complexity to support a feature that didn't work properly and nobody was using? More ability to detect spam?
There is a product reason - AI features are fundamentally incompatible with E2EE. If they want to bring more AI generated experiences and content into Instagram then the data needs to be accessible by them.