Others are noting clients & servers matter. This isn’t a downside—it’s just that the protocol is flexible & extensible for many types of messaging beyond human2human private conversations, which explains why encryption isn’t a requirement for the clients. With that said any modern client targeting said H2H interaction will have basic forms of encryption like PGP, OTR, & OMEMO which all do the job of E2EE. OMEMO is based on the same ideas that Signal, WhatsApp, Matrix, & so on use so that part is all the same.

A unique feature for XMPP in this space tho is how low-spec & resource-unintensive the servers/clients are—you aren’t chewing up a ton of CPU or RAM, there is no eventual consistency to balloon storage (MAM is enough), clients don’t drain your battery or take literal minutes to sync with servers. Since it is low-cost, it is feasible to self-host XMPP from a residential server (at home on some old hardware for instance) or add it to a multipurpose machine where it doesn’t get in the way of other processes/storage. Some of the other service often mentioned here either you can’t self-host or are quite expensive to run (often by design) which limits the accessibility causing centralization as well as requiring trust in that server you don’t own.