We are getting the error, "Key provider is not compatible with the host. Reason: "The host does not support Native Key Provider" " when using Native Key Providers on ESXi 7.0U1 and bellow

Products

• VMware vSphere ESXi

Issue/Introduction

When you are running a vCenter 7.0U2 or higher and ESXi 7.0U1 or lower you may get the following error when attempting to using Native Key Providers: 

Key provider is not compatible with the host. Reason: "The host does not support Native Key Provider"

This document explains why we cannot apply a native key provider to an ESXi host below 7.0U2. 

Environment

vCenter 7.0U2 or higher and ESXi 7.0U1 or lower. 

Cause

Since Native Key Providers (NKP) was released in version 7.0U2 of vCenter and ESX, any ESXi hosts below 7.0U2 will not be able to use the NKP. This is because prior to ESXi version 7.0U2, we were looking for the Key Management Server (KMS) rather than looking for the NKP. 

Resolution

In order to resolve this both vCenter Server and ESXi need to be at vSphere 7 Update 2 or newer. We strongly suggest running the most recent versions of vSphere.  

Additional Information

For additional Questions and answers about NKPs see: vSphere Native Key Provider (NKP) Questions & Answers