By encrypting, I'm assuming you're referring to password hashing, which is a one way process whose virtue is that it is hard to reverse.
Indeed, there is no value in hashing passwords under these conditions:
We have some sort of guarantee that the users are not reusing the passwords for multiple sites.
We have some sort of guarantee that the passwords themselves do not contain personal information (unrelated to their role as security credentials).
These conditions are not met if the users are random individuals from the general public; therefore, the standard practice is to hash passwords.
Regarding the first point, if plain-text passwords leak which are re-used for accounts on other sites, those who obtain the leaked password have instant access to those accounts. Even if a bulletin about the breach is put out which reaches all users, and they all act on it, they will probably not act in time. If the passwords are hashed, it takes time to obtain access; the passwords must be cracked first, and only weak passwords (e.g. dictionary words) will succumb to that more or less instantly. Users with reasonably strong passwords who react to the breach bulletin have a fighting chance to log in to the other sites and change their reused passwords.
Regarding the second point, suppose that, oh, someone living in a country where being homosexual is criminalized uses the password
i-am-gay, and a leak of that password gets associated with their e-mail address or other identifying information. Users can put actual personal secrets into passwords, and so we should protect passwords as if they were actual personal secrets.
There is no way to ensure these conditions in practice if the users are coming from the general public, so we encrypt passwords.
Could the conditions be met? If, say, five expert hackers are running a site for themselves, such that they are the only users, then sure, they can store their passwords in plain text. They understand security and know what they are doing. They do not use those passwords, or similar passwords, for any other system, and don't imbue any personal secret into the passwords. Thus the passwords have zero value to an attacker. If the attacker has access to the password, the system is already compromised, and the passwords themselves are not a gateway to anything else.