Seems like this issue is fixed in Xcode 26.5 Beta 2. Release Notes Simulator Fixed: Pasteboard Synchronization within Simulator.app is currently not functioning. (173403967) (FB22340739)

I got this output Could not find service "com.apple.pboard" in domain for system for xcrun simctl spawn booted launchctl kickstart -k system/com.apple.pboard

Here is the bug report number FB21087779

I have the same issue on iOS 26.1 and iOS 26.2 (beta). SwiftUI's PhotosPicker works fine, though. Haven't found solution for it yet.