Why is MacBook Pro login window now asking for a PIN rather than password?

Please describe which, if any, of the screens in this Apple Support document describe what you're seeing: If your Mac doesn't start up all the way - Apple Support.

If none of them apply, then describe or post a picture of it.

Thanks. I understand it is not the System lock PIN code screen then.

Is it possible that at one time, you or another (possibly previous and long forgotten) user of that Mac required using a hardware key (USB device) to log in to that Mac?

If so, or if that Mac has ever been out of your physical possession and control there could be reason for concern, in which case I'd be satisfied with nothing less than erasing that Mac and reconfiguring it to ensure nothing that modified it from its factory configuration remains. On the other hand it may simply be a macOS bug that only Apple can address, and I'm just causing needless concern by suggesting that possibility.

If none of those suggestions seem applicable then contact Apple and ask: Get Support.

Yes, that explains it. Perhaps the key needs to be manually ejected / dragged to the Trash prior to logging out, otherwise the Mac is expecting it to be present when it isn't? I can't be certain.