Same thing here. Played a match just fine, and then without downloading any new mods or anything went to start a new match and started getting "could not update selected mods" message. I was getting the message whether I had any mods selected or not. Ended up deleting everything and uninstalling FAF, restarted my PC, reinstalled FAF. Even with no mods installed I still get "could not update selected mods". Very saddening.

java.util.concurrent.CompletionException: NotifiableException(i18nKey=mod.errorUpdatingMods, i18nArgs=[])
at org.springframework.aop.interceptor.AsyncExecutionAspectSupport.lambda$doSubmit$3(AsyncExecutionAspectSupport.java:281)
at java.base/java.util.concurrent.CompletableFuture$AsyncSupply.run(CompletableFuture.java:1768)
at java.base/java.util.concurrent.ThreadPoolExecutor.runWorker(ThreadPoolExecutor.java:1136)
at java.base/java.util.concurrent.ThreadPoolExecutor$Worker.run(ThreadPoolExecutor.java:635)
at java.base/java.lang.Thread.run(Thread.java:833)
Caused by: NotifiableException(i18nKey=mod.errorUpdatingMods, i18nArgs=[])
at com.faforever.client.mod.ModService.writeActiveMods(ModService.java:348)
at com.faforever.client.mod.ModService.overrideActivatedMods(ModService.java:304)
at com.faforever.client.mod.ModService.updateAndActivateModVersions(ModService.java:410)
at com.faforever.client.mod.ModService$$FastClassBySpringCGLIB$$aae9cfd3.invoke(<generated>)
at org.springframework.cglib.proxy.MethodProxy.invoke(MethodProxy.java:218)
at org.springframework.aop.framework.CglibAopProxy$CglibMethodInvocation.invokeJoinpoint(CglibAopProxy.java:793)
at org.springframework.aop.framework.ReflectiveMethodInvocation.proceed(ReflectiveMethodInvocation.java:163)
at org.springframework.aop.framework.CglibAopProxy$CglibMethodInvocation.proceed(CglibAopProxy.java:763)
at org.springframework.aop.interceptor.AsyncExecutionInterceptor.lambda$invoke$0(AsyncExecutionInterceptor.java:115)
at org.springframework.aop.interceptor.AsyncExecutionAspectSupport.lambda$doSubmit$3(AsyncExecutionAspectSupport.java:278)
... 4 more
Caused by: java.nio.charset.MalformedInputException: Input length = 1
at java.base/java.lang.String.throwMalformed(String.java:1240)
at java.base/java.lang.String.decodeUTF8_UTF16(String.java:1191)
at java.base/java.lang.String.newStringUTF8NoRepl(String.java:728)
at java.base/java.lang.String.newStringNoRepl1(String.java:756)
at java.base/java.lang.String.newStringNoRepl(String.java:738)
at java.base/java.lang.System$2.newStringNoRepl(System.java:2390)
at java.base/java.nio.file.Files.readString(Files.java:3369)
at com.faforever.client.mod.ModService.writeActiveMods(ModService.java:330)
... 13 more