A Trusted Platform Module (vTPM) is a virtualized version of a physical TPM device that provides enhanced security for virtual machines. A vTPM device can be added to a virtual machine to enable features such as encryption, attestation, and key management. A vTPM device requires a Key Management Server (KMS) to store and manage the encryption keys.

To create instant clones VMs with a vTPM device, the vCenter Server user must have certain privileges in addition to those required for instant clones without a vTPM device. One of these privileges is Manage KMS, which allows the user to perform cryptographic operations on the vTPM device, such as cloning, decrypting, encrypting, migrating, and registering. The Manage KMS privilege is part of the Cryptographic operations privilege group on vCenter Server.

The other options are not required only for instant clones VMs with a vTPM device:

Upgrade virtual machine compatibility: This privilege allows the user to upgrade the virtual hardware version of a virtual machine to support new features and capabilities. This privilege is required for instant clones VMs regardless of whether they have a vTPM device or not.

Configure Host USB device: This privilege allows the user to configure USB devices on an ESXi host and attach them to a virtual machine. This privilege is not related to vTPM devices or instant clones VMs.

Manage custom attributes: This privilege allows the user to create, edit, and delete custom attributes for vCenter Server objects. Custom attributes are user-defined fields that can store additional information about objects. This privilege is not related to vTPM devices or instant clones VMs.

References: Privileges Required for the vCenter Server User With Instant Clones, vSphere Virtual Machine Administration, and [VMware Horizon 8.x Professional Course]