The issue was the step
# while [ ! -d /target/etc/default/grub.d ]; do sleep 1; done; echo 
"GRUB_ENABLE_CRYPTODISK=y" > /target/etc/default/grub.d/local.cfg

was not started in time.

After doing it again it worked.

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https://bugs.launchpad.net/bugs/1908058

Title:
  install failed with encrypted disk

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