.. possible to MITM the encrypted traffic, but that has additional drawbacks in fact - again in my opinion - does not add a layer of security but removes one.
True, MITM taken only by its own does not add a layer of security and instead weakens it. But security solutions do not simply add MITM for nothing, they add it to inspect the content. And this content inspection again adds security, like it does when inspecting plain HTTP traffic w/o encryption. In many cases the security gained with content inspections outweighs the weakened security due to trusted(!) MITM.
This content analysis is especially relevant to detect unwanted downloads or data leakage like credential phishing. It might also be useful for detailed logging in order to track down the cause of incidents later or to detect C2 traffic.
Blocking whole domains instead can usually be done without MITM, either by analyzing the server name (SNI) in the TLS ClientHello or by analyzing DNS requests. Newer approaches like ESNI (Encrypted SNI), ECH (Encrypted Client Hello) and DNS over HTTPS or TLS can make such less invasive analysis harder though.
Further analysis without MITM can be done using TLS fingerprinting and traffic pattern analysis (direction, size, timing ...). This provides less visibility than MITM, but might for example be useful to detect non-browser traffic, like malware communication.
None of this provides perfect security though. And many of this analysis can be bypassed with sufficient effort and knowledge. But compared to simply let all traffic pass through without observation it still provides valuable security.