diff --git a/doc/release-notes.md b/doc/release-notes.md
--- a/doc/release-notes.md
+++ b/doc/release-notes.md
@@ -4,6 +4,11 @@
 
 This release includes the following features and fixes:
 
+RPC changes
+-----------
+`createwallet` now returns a warning if an empty string is used as an encryption password, and does not encrypt the wallet, instead of raising an error.
+This makes it easier to disable encryption but also specify other options when using the `bitcoin-cli` tool.
+
 Low-level changes
 =================
 
@@ -11,3 +16,4 @@
 ---
 
 - `-fallbackfee` was 0 (disabled) by default for the main chain, but 20000 by default for the test chains. Now it is 0 by default for all chains. Testnet and regtest users will have to add fallbackfee=20000 to their configuration if they weren't setting it and they want it to keep working like before. (#16524)
+
diff --git a/src/wallet/rpcwallet.cpp b/src/wallet/rpcwallet.cpp
--- a/src/wallet/rpcwallet.cpp
+++ b/src/wallet/rpcwallet.cpp
@@ -3168,12 +3168,13 @@
 
     SecureString passphrase;
     passphrase.reserve(100);
+    std::string warning;
     if (!request.params[3].isNull()) {
         passphrase = request.params[3].get_str().c_str();
         if (passphrase.empty()) {
-            // Empty string is invalid
-            throw JSONRPCError(RPC_WALLET_ENCRYPTION_FAILED,
-                               "Cannot encrypt a wallet with a blank password");
+            // Empty string means unencrypted
+            warning = "Empty string given as passphrase, wallet will not be "
+                      "encrypted.";
         }
     }
 
@@ -3182,11 +3183,11 @@
     }
 
     std::string error;
-    std::string warning;
+    std::string create_warning;
     std::shared_ptr<CWallet> wallet;
-    WalletCreationStatus status =
-        CreateWallet(config.GetChainParams(), *g_rpc_chain, passphrase, flags,
-                     request.params[0].get_str(), error, warning, wallet);
+    WalletCreationStatus status = CreateWallet(
+        config.GetChainParams(), *g_rpc_chain, passphrase, flags,
+        request.params[0].get_str(), error, create_warning, wallet);
     switch (status) {
         case WalletCreationStatus::CREATION_FAILED:
             throw JSONRPCError(RPC_WALLET_ERROR, error);
@@ -3197,6 +3198,12 @@
             // no default case, so the compiler can warn about missing cases
     }
 
+    if (warning.empty()) {
+        warning = create_warning;
+    } else if (!warning.empty() && !create_warning.empty()) {
+        warning += "; " + create_warning;
+    }
+
     UniValue obj(UniValue::VOBJ);
     obj.pushKV("name", wallet->GetName());
     obj.pushKV("warning", warning);
diff --git a/test/functional/wallet_createwallet.py b/test/functional/wallet_createwallet.py
--- a/test/functional/wallet_createwallet.py
+++ b/test/functional/wallet_createwallet.py
@@ -165,14 +165,35 @@
         walletinfo = w6.getwalletinfo()
         assert_equal(walletinfo['keypoolsize'], 1)
         assert_equal(walletinfo['keypoolsize_hd_internal'], 1)
-        # Empty passphrase, error
-        assert_raises_rpc_error(-16,
-                                'Cannot encrypt a wallet with a blank password',
-                                self.nodes[0].createwallet,
-                                'w7',
-                                False,
-                                False,
-                                '')
+        # Allow empty passphrase, but there should be a warning
+        resp = self.nodes[0].createwallet(
+            wallet_name='w7',
+            disable_private_keys=False,
+            blank=False,
+            passphrase='')
+        assert_equal(
+            resp['warning'],
+            'Empty string given as passphrase, wallet will not be encrypted.')
+        w7 = node.get_wallet_rpc('w7')
+        assert_raises_rpc_error(
+            -15,
+            'Error: running with an unencrypted wallet, but walletpassphrase was called.',
+            w7.walletpassphrase,
+            '',
+            10)
+
+        self.log.info('Test making a wallet with avoid reuse flag')
+        # Use positional arguments to check for bug where avoid_reuse could not
+        # be set for wallets without needing them to be encrypted
+        self.nodes[0].createwallet('w8', False, False, '', True)
+        w8 = node.get_wallet_rpc('w8')
+        assert_raises_rpc_error(
+            -15,
+            'Error: running with an unencrypted wallet, but walletpassphrase was called.',
+            w7.walletpassphrase,
+            '',
+            10)
+        assert_equal(w8.getwalletinfo()["avoid_reuse"], True)
 
         self.log.info(
             'Using a passphrase with private keys disabled returns error')
@@ -180,7 +201,7 @@
             -4,
             'Passphrase provided but private keys are disabled. A passphrase is only used to encrypt private keys, so cannot be used for wallets with private keys disabled.',
             self.nodes[0].createwallet,
-            wallet_name='w8',
+            wallet_name='w9',
             disable_private_keys=True,
             passphrase='thisisapassphrase')