I go to the UofA, who did this after we switched online halfway through the semester (thanks covid). Pretty much everyone agreed pass/fail was necessary, but there was a lot of debate on whether it should be mandatory or left to student choice. In the end, the powers that be made it mandatory for every student and every class. Then they proposed this bizarre idea of letting professors write a letter detailing our class ranks, but that never fully materialized.
I read the application info for UofA's program, and it seems like winter 2020 counts towards the last 20 courses, but gpa is only calculated on the graded stuff (basically situation #1 in my orginal comment). I guess they realized the kind of predicament they created. It's too bad this policy isn't nation-wide.