The problem here is you’re not actually in recovery mode if it’s trying to reset a password or no user qualifies to unlock the storage. I would start up back to macOS and be sure you have internet, wired Ethernet preferably, and try to validate your user is set up properly or make a new admin account. Then I would do all updates and reboot.
Just about everything you learned on Intel needs to take a back seat for Apple Silicon machines.
If you press and hold the power button, are you seeing options?
Turn on your Mac and continue to press and hold the power button until you see the startup options window. Click the gear icon labeled Options, then click Continue.
In your case, if there are no users that are properly entangled with the controller chip Secure Enclave to unlock the encrypted drive, you may have to fix that in macOS or backup and restore the Mac using Apple Configurator.
Also, you may want or need to get to 11.4.1 and ensure you have what Howard Oakley called 1TR configured:
This is a very complicated situation and we will probably need to know exact versions of macOS, recoveryOS, what security mode you are running in, if you have MDM, DEP, and recreate the path your Mac came into existence.
Reality is way more complicated than SIP or noSIP now.
It might be far easier to wipe it entirely and get things running and patched now in June 2021 updates and improvements Apple has shipped. Initially all the tooling you needed didn’t ship.