We're basically just discussing end-to-end encryption.

The real reason it's not done more often is that it makes things a lot of things way more complicated from a development perspective. Features like "allow users to send messages to each other" that would normally be really simple to implement suddenly require a whole public key infrastructure and logic to take into account edge cases like "What if the user got a new phone or changed their password and was offline when the message was sent?", or onerous threat models like "What if the server is controlled by an attacker when I sign-in?"