  Two-dimensional (2D) insulators are a key element in the design and
fabrication of van der Waals heterostructures. They are vital as transparent
dielectric spacers whose thickness can influence both the photonic, electronic,
and optoelectronic properties of 2D devices. Simultaneously, they provide
protection of the active layers in the heterostructure. For these critical
roles, hexagonal Boron Nitride (hBN) is the dominant choice due to its large
bandgap, atomic flatness, low defect density, and encapsulation properties.
However, the broad catalogue of 2D insulators offers exciting opportunities to
replace hBN in certain applications that require transparent thin layers with
additional optical degrees of freedom. Here we investigate the potential of
single-crystalline Molybdenum Oxide (MoO$_3$) as an alternative 2D insulator
for the design of nanodevices that require precise adjustment of the light
polarization at the nanometer scale. First, we measure the wavelength-dependent
refractive indices of MoO$_3$ along its three main crystal axes and determine
the in-plane and out-of-plane anisotropy of its optical properties. We find the
birefringence in MoO$_3$ nanosheets compares favorably with other 2D materials
that exhibit strong birefringence, such as black phosphorus, ReS$_2$, or
ReSe$_2$, in particular in the visible spectral range where MoO$_3$ has the
unique advantage of transparency. Finally, we demonstrate the suitability of
MoO$_3$ for dielectric encapsulation by reporting linewidth narrowing and
reduced inhomogeneous broadening of 2D excitons and optically active quantum
emitters, respectively, in a prototypical monolayer transition-metal
dichalcogenide semiconductor. These results show the potential of MoO$_3$ as a
2D dielectric layer for manipulation of the light polarization in vertical 2D
heterostructures.
