Yeah, admittedly I rushed that part, and should've taken more time for details. My biggest guess is that the chat app will just be a client for Fediverse server users to sign into, with all the conversations happening off-server in a client. That's the only way I could think of this working, with the way that the network currently operates.

In the future, it might be possible for a lot of different Fediverse servers to natively support encrypted chat. But, these are all just guesstimates, and I'm not even sure that the lead dev is ready to publicly comment on a set-in-stone policy. Likely, there's probably a lot of experimentation happening.