I wouldn't use that option in 2023. It was introduced in an era when low end phones had 4gb of internal storage and it would be full by simply connecting to internet and automatically downloads the updates for the google apps.
It depends how it's encrypted. I can't find info on it. If it uses the same way for the internal storage, "raw" encryption, then I think there's no way to easily replace it. Maybe if there's an option in the software to "prepare for removal", where all the contents are moved away.
If it uses a Linux partition encrypted with luks (I feel unlikely) then it could be cloned and then with expanded with gparted
But I think I remember someone saying at the time that this option is extremely dangerous because it's effectively a raid 0 with the internal memory and when the sdcard fails, everything is lost. And sd cards are not that reliable