Thanks everyone, it worked for me as well with a backup watch-sources.bnk. If you installed from snap, the file to be replaced is not in .config but in : ~/snap/spotify/<snapshot number>/.config/spotify/Users/<username>-user
For me, with 1.1.26 I can add the the local files, but not that version nor in newer version I can play the files. I get errror: Spotify can't play this right now. If you have the file on your computer you can import it.
So I copied watch_sources.bnk from an older version of Spotify and it does show the new location in the newer version of the application. However, when I download songs, they're still stored under ~/.cache/spotify (I compared the size of both folders). Can someone help me with this? By the way, the new folder is on a second hard drive, if that matters.
Edit: Actually, the problem was indeed the fact that it was on a second hard drive because when I made another folder on the same drive, it magically worked! It doesn't seem to be a permission issue either! Kinda defeats the purpose of changing save location..
The latest Spotify client still crashes on my Ubuntu 20.04 machine, but I managed to configure what I want on it.
There's a Docker container with an old Spotify client https://hub.docker.com/r/syncomm/spotify/. Modify the docker-spotify.sh in the url to mount a directory you want to configure, and execute the script. You can add the directory to sources, and then close the GUI to save watch-sources.bnk.
Once you copy "/home/spotify/.config/spotify/Users/[username]-user/watch-sources.bnk" on Docker to local "~/snap/spotify/current/.config/spotify/Users/[username]-user/watch-sources.bnk` and open a local Spotify client, it will have what you want.