I don’t think you are able to read local files when submitting jobs via the web-ui (atleast I’d expect a popup regarding accessing your localdrive by your browser.)
If I remember correctly, the filesystem-functions were added along with the hcl2 support.
Functions are evaluated by the CLI during configuration parsing rather than job run time, so this function can only be used with files that are already present on disk on operator host.
If you manually base64encode the key & use the string in place of the file()-function, I’d assume it works fine?
EDIT: I see now that this was already answered in the github-issue