diff --git a/src/util/system.cpp b/src/util/system.cpp
--- a/src/util/system.cpp
+++ b/src/util/system.cpp
@@ -872,8 +872,10 @@
     std::string::size_type pos;
     int linenr = 1;
     while (std::getline(stream, str)) {
+        bool used_hash = false;
         if ((pos = str.find('#')) != std::string::npos) {
             str = str.substr(0, pos);
+            used_hash = true;
         }
         const static std::string pattern = " \t\r\n";
         str = TrimString(str, pattern);
@@ -890,6 +892,13 @@
                 std::string name =
                     prefix + TrimString(str.substr(0, pos), pattern);
                 std::string value = TrimString(str.substr(pos + 1), pattern);
+                if (used_hash && name == "rpcpassword") {
+                    error = strprintf(
+                        "parse error on line %i, using # in rpcpassword can be "
+                        "ambiguous and should be avoided",
+                        linenr);
+                    return false;
+                }
                 options.emplace_back(name, value);
             } else {
                 error = strprintf("parse error on line %i: %s", linenr, str);
diff --git a/test/functional/feature_config_args.py b/test/functional/feature_config_args.py
--- a/test/functional/feature_config_args.py
+++ b/test/functional/feature_config_args.py
@@ -31,6 +31,11 @@
         self.nodes[0].assert_start_raises_init_error(
             expected_msg='Error reading configuration file: parse error on line 1: nono, if you intended to specify a negated option, use nono=1 instead')
 
+        with open(inc_conf_file_path, 'w', encoding='utf-8') as conf:
+            conf.write('server=1\nrpcuser=someuser\nrpcpassword=some#pass')
+        self.nodes[0].assert_start_raises_init_error(
+            expected_msg='Error reading configuration file: parse error on line 3, using # in rpcpassword can be ambiguous and should be avoided')
+
         with open(inc_conf_file_path, 'w', encoding='utf-8') as conf:
             conf.write('')  # clear