Anyone like myself stumbling across this topic after a similar issue cropped up back in early December 2020, I can confirm that the advice in this comment above about setting security.nesting=true still applies today with LXD 4.x and the latest:archlinux image, e.g.
lxc launch images:archlinux -c security.nesting=true
or
lxc init images:archlinux $container
lxc config set $container security.nesting true
Note: I have no idea why this works or what the security ramifications are but it suffices for the use case I have.