Cannot create Notebook connection with Workspace Identity authentication

I wanted to create a Notebook connection for a Notebook activity in Factory pipelines using Workspace Identity instead of Service Principal but encountered an error. I am aware that this feature may not be completely rolled out but I would not expect it to be available in Fabric UI if it's not available in my region. As it happens now, both Fabric documentation and Fabric UI allow choosing a Workspace Identity to be used for authentication in Notebook connection, but creating one is impossible.

UI shows an error:

This error is corresponding to an API request, as seen in the browser:

Very confusing, that the response is 200 OK, but the response content clearly shows that something went wrong:

The powerBIApiErrorObject has this content:

{
    "Code": "DMTS_InvalidCredentialTypeError",
    "Message": null,
    "Target": null,
    "Details": null,
    "InnerError": null,
    "pbi.error": {
        "code": "DMTS_InvalidCredentialTypeError",
        "parameters": {},
        "Details": [],
        "ExceptionCulprit": 1
    }
}

 I wonder if anyone has better insights in this situation and can explain.