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M1 Xcode 12.5 can't paste clipboard
I searched for an answer for this for some time. For Apple Silicon (M1) I eventually found a page where some users had tracked it down to an issue with iOS 14+. When I installed switched to a simulator iOS 13.7 as instructed (see link) pasting worked again. While this is clearly not what was going on with the original question (10 years ago!), I am pasting here in case someone else has this issue.
Hope this helps...