I reset my password for Microsoft just to provide you a work-around -
If you disable Bluetooth this prompt should go away. I found this out because the prompt wouldn't show up on my work VM but it would on my laptop. Funny enough I wondered why and I finally found out that it requires bluetooth-capabilities to work. So I enabled it on the VM and it worked. So if you disable bluetoooth on your PC it should in fact disable this prompt.
UPDATE: I tested it and that seems to do it. However you must disable it through Device Manager itself, you cannot just turn off bluetooth.
@iEzJay - you are a genius! I went into Device Manager, disabled the Bluetooth device, then tried logging in again. Now all I see is the "Security Key" option which is effectively my YubiKey!
BRILLIANT workaround! Thank you for figuring that out and taking the time to share with the rest of us.
Folks - it really does work. Of course, you need to be willing to forgo Bluetooth connectivity - so if you rely on Bluetooth for mouse, keyboard, or anything else, you will have to decide which is more important for the time being.
Personally, I can't stand Bluetooth, so I'm perfectly content with disabling it.
Hopefully someone at Microsoft will actually take note of how much of an issue this is and do something about it.