We also ensure we check the sanity of data being synced over network using cryptographic hashed functions specifically, hash-based message authentication code.
Some information from your storage is collected to diagnose the issue.
Windows 10 Mobile Q: The Windows 10 Mobile operating system was deprecated December 2019.
Well, my phone has a passcode like most phones tied to intune and same for Watch.
Try to remove the account in Authenticator and try again to see if there's any different.
You only need to use app passwords if you're continuing to use older apps that don't support two-factor verification.