If only that were true; that'd be no problem at all.
The problem is procedural, and has to do with slicing up spacetime-filling fields into field-values on spacelike hypersurfaces (values-surfaces). I'll focus on one procedure -- there are others that have their place as well.
In a spacetime without any black holes at all, we can take any such values-surface whereupon all the values are specified, and from that we can recover all the values of the spacetime-filling fields everywhere in the spacetime. This is the https://en.wikipedia.org/wiki/Initial_value_formulation_(gen...
The important thing about the initial value formulation is that we can on our chosen values-surface perturb a single field-value, and trace the consequences to neighbouring values-surfaces, and their neighbouring values-surfaces, and eventually recover the whole set of spacetime-filling fields everywhere in the spacetime. Indeed, one family of slicing, https://en.wikipedia.org/wiki/Hamiltonian_constraint#Hamilto... lends itself to https://en.wikipedia.org/wiki/Canonical_quantum_gravity (CQG). CQG works everywhere in the absence of strong gravity, and even provides a clear definition of strong gravity in terms of renormalization: http://www.preposterousuniverse.com/blog/2013/06/20/how-quan... (Below I'll generalize this to the Effective Field Theory (EFT)).
If we have no black holes, and no early singularity, the effective theory is almost certainly correct everywhere in the space-time. (Here I won't even consider the early universe problem; there is a problematical ultradense phase in the Hot Big Bang model that requires beyond-the-standard-model physics that wrecks fields-of-the-standard-model values-surfaces before we get to strong gravity.)
If we add black holes, but without Hawking Radiation (that is, they only ever grow) on each hypersurface we have to "cut out" the field-values at the boundary of any region containing strong gravity. These regions are, crucially, well inside the event-horizons of massive black holes. That is, the EFT does not end at horizons, it ends near gravitational singularities.
While there are some annoyances, for most reasonable slicings, we can still recover the full spacetime-filling fields everywhere in spacetime. The field-values that enter the horizon are trapped within the horizon, and eventually they are trapped within our "cut out" region. As our black holes never evaporate, those field values have no impact on future slices. We have, however, found ourselves with a new constraint that picks out a direction of time: the future is the direction in which the "cut out" has no impact, but the past is one in which the "cut out" emits field-values. That's the main source of annoyance, and stresses the "initial" part of "initial values". Picking out just any surface will only guarantee you recovery of the future successor surfaces; in most cases you cannot even in principle recover the past values-surfaces, with the result that you also cannot recover the whole set of spacetime-filling fields. THIS is the incompatibility between quantum mechanics and general relativity.
(In practice, researchers -- including Hawking in his original Hawking Radiation paper -- choose to study "eternal" black holes that never grow or shrink, so that the field-values are always recoverable everywhere outside the horizon. However, because the black hole doesn't grow, you have to play some tricks to deal with matter that crosses the horizon. Those tricks lead to the negative-energy particles in Hawking's paper and in many popularizations of Hawking Radiation. In a more realistic model, one would let the black hole grow or shrink, and do away with the need for negative energy altogether, although it would not have been tractable for Hawking to take that more realistic approach in the fancifully named "Black hole explosions" paper of 1974, https://www.nature.com/articles/248030a0 ).
Let's condense the point made above: we cannot reconstruct the full past of a black hole that forms by gravitational collapse of matter. (This gives rise to the black hole uniquess theorems and in particular https://en.wikipedia.org/wiki/No-hair_theorem ). Without black hole evaporation, we can still predict the full future.
If we add black hole evaporation via thermal Hawking Radiation, we have a new problem that breaks the future predictability as well. Black holes at every time in their history from initial collapse to final evaporation emit Hawking quanta fully determined by their no-hair parameters[1]. In a typical black hole, the mass parameter is the driving term. If one starts with an initial values-surface just before strong gravity appears, then the very next (future) values-surface probably has Hawking quanta. The spectrum of the Hawking quanta is statistical: it is, in quantum field theory terms, a mixed state. But the spectrum of all the quanta in the fields just before strong gravity arises is a pure state. In more relaxed terms, we have full knowledge of the pure state, but we can only talk in terms of statistics for the mixed state.
The problem persists across the whole of the future spacetime: a Hawking quantum can fly off to infinity, and for realistic fields (e.g. the standard model), it may interact with other matter at arbitrarily large distances from the black hole. (Hawking Radiation was initially modelled with all matter represented as a non-interacting scalar field; the field-values of the Hawking scalars propagate to infinity, but don't really matter all that much in the model. But if a small-mass black hole emits an electron-positron pair, the former could fly off and meet a proton some time in the future, and probably we would want to know about a proton gas being neutralized with the result that it may begin to collapse gravitationally, whereas in the absence of Hawking electrons, it likely would not. Although the initial model was very restricted, these sorts of implications were almost immediately clear: large scale effects can be triggered by Hawking radiation, and as Hawking radiation is inherently probabilistic, we have a cosmic Schroedinger's Cat problem.)
So, back to your words:
> cryptographic mixing function
Hawking radiation converts a pure state into a mixed state. A cryptographic mixing function converts a pure state into a pure state in a way which is hard to trace.
Now, back to this article. Hawking et al. decided to break the no-hair theorem, and to decorate black holes in such a way that you can still recover the past of a (never-evaporating, always-growing, no Hawking radiation) whole spacetime from a values-surface on which there is already strong gravity. Additionally, the same mechanism allows one to recover the whole future of the spacetime from a values-surface on which there is strong gravity (and thus Hawking radiation). The downside is that one has to have the full set of values on the fields with strong-gravity, and those will (under the idea in the OP paper) include extremely low energy "soft hair" particles (the OP paper does not decide whether "soft hair" is just photons, or may be the whole set of standard model particles; as with the original 1976 paper Hawking and his coauthors consider a restricted form representation of all matter in the spacetime).
So in a way, what they are doing is introducing a "cryptographic mixing function" to avoid producing a mixed state. You get determinism everywhere (instead of determinism before strong gravity, and probability after) in initial-values formalisms, by doing away with the no-hair theorem (which raises questions about the uniqueness of theoretical black hole models like Schwarzschild and Kerr).
It is an interesting idea that deserves further study (and will get it), but it is too early to make bets on whether it will be fully succcessful at repairing the "damage" that strong gravity does to the EFT.
Moreover, it is not an answer to the question, "what happens in strong gravity", and in particular does not prevent the formation of a gravitational singularity inside a black hole. It also has nothing to say about what happens at extremely high energies (much higher than the electroweak scale) in the early hot, dense universe.
However, just making the EFT work in a wider variety of spacetimes is a fine goal!
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[1] The Hawking radiation when a black hole initially forms by gravitational collapse of matter is pretty extreme and is relevant to the early black hole and its immediate environment. It's hard enough to take into account that the difficulty gets its own name: the backreaction problem. The gravitational backreaction (much less matter interactions) of hairs produced at young black holes is not mentioned in the OP paper by Hawking et al. :/