I’m not convinced that BandCamp are doing anything wrong per se:
According to https://en.wikipedia.org/wiki/ID3#ID3v2 there are 4 possible text encoding types in ID3v2, with only two of them supported in ID3v2.3: ISO-8859-1 and UCS-2 (which I suspect Kid3 mistakenly calls UTF-16; they sound like similar/related encodings). The other two encodings (UTF-16BE and UTF-8) are only supported in ID3v2.4; I didn’t test those.
I have no idea why non-ascii text is needed in the album art tag (perhaps for the original image filename, which seems to be preserved?), so I’ll reach out to BandCamp in case they want to maximize the compatibility of their files, but it seems to me that Engine Prime should be able to read the album art from their files as-is; all other software I’ve tried is able to.