This can run on a separate system capturing the video output, so it could theoretically work on any console as well. All one really needs is to emulate the gamepad signals.
If someone is willing to buy a special input device featuring signal encryption, then what's to stop them from buying additional hardware to automatically control that device? Such hardware could either mechanically click the button switches, or do so electronically via some simple modifications to the original hardware. And mouse movements could be emulated using something like an automated roller ball underneath to simulate the surface moving, or a mechanical device on top that moves the mouse itself. And the same could be done with gamepads on a console, either by connecting them to a device that physically moves the thumbsticks and presses the buttons, or by having the gamepad modified to electronically bypass those components. Considering some people are willing to pay hundreds of dollars or more for working cheats, there would undoubtedly be a market for such devices.
As for potential countermeasures, it might be possible for games to detect movements as being "unnatural", though false-positives might potentially occur. Perhaps machine learning could be used to compare user inputs against an array of known cheat systems and human inputs, though that might just lead to machine-learning-based cheat systems doing the same to counteract them.
And if people were trying to cheat at tournaments, obviously something like this wouldn't work for in-person events. Or even for online tournaments, there could be a requirement for those taking part them to stream a video showing their hand movements to verify that they actually line up with what's happening in-game.