I confirm the following error is caused by the group policy setting
System cryptography: Use FIPS compliant algorithms for encryption, hashing, and signing
The reason BoxCryptor throws the exception is because:
Microsoft .NET Framework applications such as Microsoft ASP.NET only allow for using algorithm implementations that are certified by NIST to be FIPS 140 compliant. Specifically, the only cryptographic algorithm classes that can be instantiated are those that implement FIPS-compliant algorithms. The names of these classes end in "CryptoServiceProvider" or "Cng." Any attempt to create an instance of other cryptographic algorithm classes, such as classes with names ending in "Managed," cause an InvalidOperationException exception to occur. Additionally, any attempt to create an instance of a cryptographic algorithm that is not FIPS compliant, such as MD5, also causes an InvalidOperationException exception.
It is not always possible to disable this setting, and it is actually required by applications such as BitLocker. There is a workaround however:
You can disable the FIPS check within the .Net Framework by editing