The point is that the cheating problem is unsolvable at scale against sufficiently motivated attackers.
It would be possible to solve if the incentives are not that strong to cheat, but the status game associated with multiplayer games takes care of the "sufficiently motivated part".
It would be possible to solve at a small scale (e.g. at a tournament) by manually vetting hardware and manually reviewing footage.
But preventing cheating at scale against motivated attackers is so expensive as to be uneconomical. The devs will probably try to install whatever malware they can get away with in order to demonstrate to their shareholders that they care about it, but I'm guessing even the devs will be relieved when Microsoft just blocks their kernel-level malware because they know the risks it entails.
It would be possible to solve if the incentives are not that strong to cheat, but the status game associated with multiplayer games takes care of the "sufficiently motivated part".
It would be possible to solve at a small scale (e.g. at a tournament) by manually vetting hardware and manually reviewing footage.
But preventing cheating at scale against motivated attackers is so expensive as to be uneconomical. The devs will probably try to install whatever malware they can get away with in order to demonstrate to their shareholders that they care about it, but I'm guessing even the devs will be relieved when Microsoft just blocks their kernel-level malware because they know the risks it entails.