icloud keychain requires macbook pro password

I just received my brand new MacBook Pro 16 inch, Apple M1 Pro, 32GB.

I transferred everything from my old MacBook Pro using Migration assistant.

Everything seems to be working beautifully except I cant turn on iCloud Keychain.

When I try to turn it on, I get the following dialog:

I already have a password to log on to this Mac. If I click 'Continue' I enter my Apple ID password and then get this:

I've tried entering a new password here but 'Create Password' does nothing.

I tried entering my existing password but same thing happens.

I tried restarting the Mac. Still no luck.

At this point, I'm pretty much out of ideas.