> Then there's the content. Many SCMs will actually give you a representation of a text file and not the raw contents itself. That text file will be re-encoded for your local/preferred encoding, and newlines may be adjusted as well (`\r\n`, `\n`). The text file is then re-encoded back when pushing the change.

Yeah, don't do that.

> This allows people in different environments to operate on the same file regardless of what encoding they're working with.

No it causes hard to understand bugs because now what people see on their device and what is tracked in source control differs, defeating the entire purpose of having source control in the first place. This isn't theoretical at all btw.

> The solution is to either know the encoding of the file you're processing

In general, there is no such encoding - source control tools need to be able to deal with files not valid in any single encoding.