Office 365 Mail Encryption

Your user is required to have "Azure Information Protection Plan Premium P1" or a license that includes this.

Powershell

Get-OMEConfiguration
Get-IRMConfiguration

Enable Encrypt Button

https://docs.microsoft.com/en-us/microsoft-365/compliance/manage-office-365-message-encryption?view=o365-worldwide

Set-IRMConfiguration -SimplifiedClientAccessEnabled $true

Enable AIPService

This may resolve RMS related errors?

Enable-AipService
$EndPoint=(Get-AipServiceConfiguration).LicensingExtranetDistributionPointUrl
Set-IRMConfiguration -LicensingLocation $EndPoint
Set-IRMConfiguration -InternalLicensingEnabled:$true -AzureRMSLicensingEnabled:$true -AutomaticServiceUpdateEnabled:$true -SimplifiedClientAccessEnabled:$true

Test it all

Test-IRMConfiguration -Sender user@acme.com -Recipient user@contos.com