Learn English – I wish you would speak louder…. vs I wish you spoke louder….

Your last clause specifies that they gave it to us in the past; and they had to know in the past, too, that we would be unable to break it, since that is why they did so.

However, that knowledge could very easily extend into the present and future, as could our inability to break it.

So either of your examples could be appropriate, depending on context; so could another possibility, with both KNOW and CAN in past form. Putting time references in should make the differences clearer.

They know now (and knew at the time when they gave it to us) that we can't break this now (or at any future time that matters); that's why they gave it to us.

They knew when they gave it to us (recently) that we can't break this now (or at any future time that matters); that's why they gave it to us.

OR

They knew back when they gave it to us that we couldn't break this at that time (or at any subsequent time that mattered); that's why they gave it to us.

Which is correct will depend on what you mean.

Verbforms in a conditional like this, employing what we used to call "reported" speech, without direct quotation, will be shaped by the context—specifically, the verbform in the clause representing the speech will depend on whether the hypothetical "scopes" over the subordinate clause.

A: What would you say if I asked you to have dinner tonight?
B: I would apologize and say that I'm too busy—I have papers to grade.

Here the context is a question about B's hypothetical action (what would you say) respecting a possible and knowable future action. Since as a matter of actual fact B is not free, she responds with an ordinary indicative.

C: You don't know how to say No. If you were really really busy and I asked you to dinner, you'd go, even if it meant staying up all night grading papers.
B: That's not true. I would apologize and say I was too busy.

Here the context is an allegation about B's hypothetical action (you would go) in a hypothetical situation (if you were busy). Since B's denial does not reflect an actual situation but a hypothetical situation, she responds with a past form—what the Cambridge Grammar of the English Language calls a "modally remote" use of the past.