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there will probably be some regulation about this feature xD fbi and cia and everyone else want to be able to see your chat history
The problem I see with this is that it adds the ability to alter history. You can effectively remove messages sent by the other person, altering context and changing the meaning of the conversation. You can also remove evidence of transactions, work or anything else.

I get that this is supposed to be a benefit, but it's also a very significant issue, especially where business is concerned.

One of the reasons I have understood this not to be possible with, e.g., Signal, is that in order to do this, the server would have to know more about your messaging history than you'd ideally like.

Is that true here?

Telegram syncs history through its own cloud, so essentially yes.
As a person who accidentally posted sensitive info on chats, I welcome this feature. I do wish they implemented an indication "message deleted" in the chat to show that the editing took place.