How do I then decrypt the cloud files then ?
What happens if the drive where the local files are unencrypted on dies?
Nothing. Cryptomator en- & decrypts on-the-fly. The Cryptomator drive/folder is purely virtual, it is not stored on disk. Only the encrypted files are stored on your hard drive/cloud storage.
You open Cryptomator, import the vault which is synchronized with your cloud provider app and unlock it. 