The information on those drives was the group's insurance. Nobody could betray the others, because all of them were holding everything they needed to destroy the others. It's the principle of Mutually Assured Destruction in action.
Of course, if one person could be separated from their flash drive, they can be easily betrayed, because they don't have the means to retaliate. If everybody left their flash drives at home for a mission, then, for example, the team member who was arranging the helicopter to pick them up afterwards could betray the team, leave them behind, go home and collect all their flash drives, and get away clean.
For this reason, it makes sense for them all to keep their flash drives on their person at all times, so they can be sure that it hasn't been taken. It's implied that they don't really trust each other as people; instead, they trust in the countermeasure of all having this info, the MAD doctrine on a personal scale. That paranoia would drive them to always carry the flash drive, just as the US President always had the briefcase with the nuclear launch codes during the cold war - the protection it offers only works when you're always ready to use it. If you can be separated from it, then the other team members can prevent you from using it, and they can betray you without fear of retaliation.
This also goes some way to explaining why he hid the flash drive, rather than destroying it: destroying it would render it "safe", in that it can't be used against him, but it then also couldn't be used against the others, and that leaves him unprotected.
As for the matter of encryption - the information worked as an insurance policy because it was usable by enemies. Making it too safe would also render it useless for its intended purpose. One use is for a team member to release it, in which case they can provide the decryption software or password or whatever, but there are other reasons it works as protection. For example, if your flash drive is unreadable without a password, then I can just arrange for you to "accidentally" fall to your death next time we're rappelling down a building - the password dies with you, and I'm safe. However, if I know that when they recover your body, they'll find a flash drive with information that will expose me, I can't do that; I have to make sure you come home (or at least, it limits me to much more obvious forms of betrayal that someone will probably pick up on).