>Why would an all powerful, all loving, all knowing god let super powerful spirits loose to trick and torment his children?
So that we can overcome them.
While I'm reluctant to disparage our benefactor, I have to point out that Jim Watkins is not one in particularly close contact with reality.
>The data would be encrypted from end to end, and stored on the cloud servers in encrypted form
They possibly also want to do some processing of that data.