Generally, this issue comes when KMS keys encrypted EBS volumes won't be able to decrypt.

There are 2 types of KMS keys:

1. AWS managed.
2. Customer managed.

If the KMS key provided is AWS managed then ASG(Auto Scaling Group) will be able to launch the instance but if KMS key is customer managed then we need to make sure we create a grant for ASG using the KMS key.

This can't be achieved from console so please refer AWS CLI command from the article below: https://docs.aws.amazon.com/kms/latest/developerguide/create-grant-overview.html

If you are using terraform then use this article: https://registry.terraform.io/providers/hashicorp/aws/latest/docs/resources/kms_grant

Also do check the Key-Policy and make sure it is correct.