In case you do not want to Encrypt the Virtual Machine, then to bypass the TPM 2.0 requirements while installing Windows 11, Please follow the below steps:
While installing Windows 11, if your computer does not meet the hardware requirements, you will see a message stating, "This PC can't run Windows 11." Windows 11 setup blocked due to missing hardware requirements.
When you see the above message, press Shift+F10 (Or Shift+fn+F10) on your keyboard at the same time to launch a command prompt. At the command prompt, type regedit and press enter to launch the Windows Registry Editor.
When the Registry Editor opens, navigate to: HKEY_LOCAL_MACHINE\SYSTEM\Setup, Right-click on the Setup key and select New > Key.
When prompted to name the key, Type LabConfig and press enter.
Now right-click on the LabConfig key and select New > DWORD (32-bit) value and create a value named BypassTPMCheck, and set its data to 1.
Once you configure the BypassTPMCheck key-value under the LabConfig key, close the Registry Editor, and then type exit in the Command Prompt followed by enter to close the window. You will now be back at the message stating that the PC can't run Windows 11. Click on the back button in the Windows Setup dialog, as shown below. Press the back button in Windows setup
You will now be back at the screen prompting you to select the version of Windows 11 you wish to install. You can now continue with the setup, and the hardware requirements will be bypassed, allowing you to install Windows 11.
source: https://kb.vmware.com/s/article/86207
If you don’t want to use an online account to login to Windows 11, you have to enter a regular username (e.g. poweruser) with a bogus password. The setup wizard will give an error that the account cannot be found/used etc and gives the option to use a traditional (local) account. Just give a username, password and the answer to 3 secret questions (for password recovery purposes in the future), and you’re ready to go.
source: https://www.techrepublic.com/article/how-to-create-local-account-windows-11/