That seems completely contrary to the spirit of EU laws and regulations, which tend to be about protecting the consumer, preventing monopolies, ensuring people can generally live their lives where all things that are mandatory are owned and ran by the state and foster a certain degree of EU independence, with a recent focus on "digital sovereignty".
This one is a five for one against all of those goals? Harms the customer (you could see this as the polar opposite of GDPR), strengthens entrenched monopolies, force citizens to be serfs of one of two private corporations in order to access information, and on top of that, like it wasn't enough, willingly capitulates to the US as the arbitrates of who is a valid person or not.
This is so against the spirit of the EU itself that it would almost be funny if people weren't serious.
Because the EU doesn't actually care about privacy, otherwise they wouldn't be trying to do this and ChatControl. They care about being the main ones to spy on you, and maybe using fines as additional "taxes" on rich foreign companies. That's it.
Europe's dependence on American tech is a major pain point but realistically, there are only two smartphone vendors. If a European vendor does rise up, I'm sure whatever app comes out of this process will happily hook into the hardware attestation API for that OS as well.
Because this is being pushed by lobbyists to use hardware attestation to make it piratically mandatory for every citizen in the EU to be registered to either Apple or Google with a real id for all non-trivial online interactions at all times. The people behind this push neither have the technical knowledge nor care in the slightest that this is the consequence.
It's not an insane question, it just doesn't get asked.
Google's ad business model should never be mandated by law, unfortunately lawmakers seem to be unaware that this is what requiring Play Integrity effectively means.
Please (kindly) ask Paolo De Rosa [1], Policy Officer at the European Commission and driver of many of the decisions behind the wallet and the ARF. His position is one of fatalism: that it's "too late"; the duopoly of Goople is entrenched, and it's therefore not a problem if the wallet project entrenches it even further. Regrettably quite a lot of member states agree, although representatives of France and Germany specifically are frequently standing up to the fatalism.