Apple Confirms macOS 12.3 Deprecates Kernel Extensions Used by Dropbox and OneDrive
Apple today seeded the first beta of macOS 12.3 to developers for testing. In the release notes for the update, Apple confirms that it has deprecated kernel extensions used by Dropbox and Microsoft OneDrive and notes that both cloud storage services have replacements for the functionality currently in beta.

Earlier this week, Dropbox announced that users who update to macOS 12.3 may temporarily encounter issues with opening online-only files in some third-party apps on their Mac. Dropbox did not provide a reason for this issue, but it is now clear that it relates to the kernel extensions that enabled this functionality being deprecated by Apple.
In a support document and an email to customers, Dropbox said it is actively working on full support for online-only files on macOS 12.3 and will begin rolling out an updated version of its Mac app to beta testers in March. In the meantime, Dropbox users who update to macOS 12.3 will still be able to open online-only files in Finder.
Microsoft is also working on a new online-only files experience for OneDrive that is "more integrated with macOS" and "will have long-term support from Apple."
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Top Rated Comments
I have no desire to use offline files, so I hope my Dropbox experiences is not impacted by this change. I see that OneDrive is going to default to off-line files with local files requiring extra effort; I hope Dropbox doesn't do that.
For personal use, and for my family, it's iCloud all the way. At that point we're in the Apple system, so there's no reason to store anything outside of it.