APFS (Case-sensitive, Encrypted)

Make sure that the flash drive is set to GUID partition map first. On a typical, new USB flash drive the only way to do that initially is to Erase the flash drive (Erase tab, not partition tab).

In Disk Utility also make sure you have selected Show All Devices. Erase the device, not any volumes that may appear within it.

Keep in mind that an APFS formatted flash drive cannot be read by older versions of macOS. You may be better off creating an encrypted sparse disk image file (.dmg) on a flash drive formatted Mac OS Extended Journaled or even ExFAT.

Alternative and from Apple link below

Protect your Mac information with encryption

Addition reading on the Differences between Encryption of External Drive and APFS (Case-sensitive, Encrypted)

https://mactakeawaydata.com/apfs-vs-apfs-case-sensitive/