The cruel reality is that this issue has never been rectified in any of the 2016+ LCs. It is just a matter of luck or time until it happens.
I have seen newer as 2020s with the same peeling effect. Hell, my 2020 HE has a similar little peel like the one above, just in a different spot. I baby it as much as I can and try not to touch much, but the older they get the more likely the issue will appear, hence why you see lots of 2016, 2017, etc with peeling wheels, as opposed to 2021s.
However look again in 5 or 6 years from now and you will see the 2020s and 21s peeling the same. At least for the NA market I do not believe Toyota ever changed the leather. Since I can't stand the aftermarket wheel covers and like the heating function, the only solution is to bite the bullet a couple years from now and replace with OEM. Again, with no guarantees the issue won't return.
The craft customs vendor might be a way out too, but I would like to see the results first. Any guinea pigs willing to try and show the results here?