Your understanding is correct: in FusionAuth, a user account must have a password to exist, and the platform requires a password when creating a user. This means there’s currently no way to completely eliminate the password field from a registration form using Custom Registration Forms, nor is there a supported method to bypass the password requirement entirely.
However, there’s a workaround if you’d like to simulate a passwordless experience. Using the Advanced Theme Editor, you can hide and automatically populate the password field on the registration page via JavaScript. This way, users won’t see or interact with the password field, but FusionAuth still receives a valid (though randomly generated) password value behind the scenes. To users, the experience feels passwordless, even though a hidden dummy password exists for each account.
More details about customizing the registration page can be found here:
Advanced Theme Editor Documentation