This is cute. It's like encrypting all of your files with the same one time pad so diff works. Also not secure at all.
It's using a real encryption method, the only flaw is having identical blocks encrypt the same. Since this is designed to be applied to a handful of small text files (I think?) this is not a crippling flaw, only a notable one.
It might not be crippling in most git-related use cases, but as a user you should not need to worry about your cryptosystem potentially leaking information. My project, git-crypt[1], is similar to git-encrypt but uses AES in CTR mode with a synthetic IV, which leaks only whether two entire files are identical. This is the bare minimum you need to leak to make git diffs work, and there's also a security definition called "deterministic CPA security" which CTR with a synthetic IV provably meets.