I have been using encryption on my devices since years.
Worked fine on my FP2 (but still not able to encrypt the external storage)
Phone says it’s encrypted. But it does not prompt for decryption password anymore when booting!
Unable to “decrypt” it, nothing happens in the security setup menu
It is possible that it is still encrypted but the second layer (your pw) got lost. I have read before that this can happen, sometimes together with os update ( can’t find it right now).
Have also a look at this:
Go to Settings / Security / Screen lock / Password and select Require password to start device:
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