diff --git a/boards/Kconfig b/boards/Kconfig
index 5caafb33079bd..c22969113f834 100644
--- a/boards/Kconfig
+++ b/boards/Kconfig
@@ -5658,11 +5658,17 @@ config BOARD_ETC_ROMFS_PASSWD_ENABLE
 	bool "Auto-generate /etc/passwd at build time"
 	default n
 	depends on ETC_ROMFS
+	depends on FSUTILS_PASSWD
+	depends on CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO || CRYPTO_CRYPTODEV_HARDWARE
 	---help---
 		Generate /etc/passwd at build time. The password is hashed with
 		PBKDF2-HMAC-SHA256 by tools/mkpasswd; the plaintext is not stored
 		in the firmware.
 
+		Requires CONFIG_FSUTILS_PASSWD (nuttx-apps) and a cryptodev
+		backend (CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO on sim, or
+		CONFIG_CRYPTO_CRYPTODEV_HARDWARE on targets with hardware crypto).
+
 		The password is hashed at build time by the host tool
 		tools/mkpasswd (compiled from tools/mkpasswd.c) using
 		PBKDF2-HMAC-SHA256 — the same algorithm used at runtime in
@@ -5678,7 +5684,8 @@ config BOARD_ETC_ROMFS_PASSWD_ENABLE
 		NUTTX_ROMFS_PASSWD_PASSWORD for CI and scripted builds (see
 		tools/update_romfs_password.sh).
 
-		Also enable NSH login with "Encrypted password file" verification.
+		When using CONFIG_NSH_CONSOLE_LOGIN with ETC_ROMFS, enable this
+		option so /etc/passwd is present at runtime.
 
 		Password is not saved in defconfig. Do not commit it.
 
diff --git a/boards/sim/sim/sim/configs/adb/defconfig b/boards/sim/sim/sim/configs/adb/defconfig
index 5d7593350bad1..e416bbdc30c68 100644
--- a/boards/sim/sim/sim/configs/adb/defconfig
+++ b/boards/sim/sim/sim/configs/adb/defconfig
@@ -18,6 +18,7 @@ CONFIG_ARCH_BOARD_SIM=y
 CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
@@ -25,9 +26,12 @@ CONFIG_CRYPTO_CRYPTODEV=y
 CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
 CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
+CONFIG_ETC_ROMFS=y
+CONFIG_ETC_ROMFSDEVNO=1
 CONFIG_FSUTILS_PASSWD=y
 CONFIG_FSUTILS_PASSWD_READONLY=y
 CONFIG_FS_PROCFS=y
+CONFIG_FS_ROMFS=y
 CONFIG_FS_TMPFS=y
 CONFIG_INIT_ENTRYPOINT="nsh_main"
 CONFIG_LIBC_DLFCN=y
diff --git a/boards/sim/sim/sim/configs/bastest/defconfig b/boards/sim/sim/sim/configs/bastest/defconfig
index ce5f3334923af..f75b713d563fc 100644
--- a/boards/sim/sim/sim/configs/bastest/defconfig
+++ b/boards/sim/sim/sim/configs/bastest/defconfig
@@ -15,12 +15,15 @@ CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
 CONFIG_BOARDCTL_ROMDISK=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_LOOP=y
 CONFIG_ETC_FATDEVNO=2
diff --git a/boards/sim/sim/sim/configs/duktape/defconfig b/boards/sim/sim/sim/configs/duktape/defconfig
index bb29332e72bde..0dbb95f003d2f 100644
--- a/boards/sim/sim/sim/configs/duktape/defconfig
+++ b/boards/sim/sim/sim/configs/duktape/defconfig
@@ -14,12 +14,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_LOOP=y
 CONFIG_ETC_FATDEVNO=2
diff --git a/boards/sim/sim/sim/configs/minmea/defconfig b/boards/sim/sim/sim/configs/minmea/defconfig
index b9dd4dd0b6567..6f7136423cd25 100644
--- a/boards/sim/sim/sim/configs/minmea/defconfig
+++ b/boards/sim/sim/sim/configs/minmea/defconfig
@@ -15,12 +15,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_GPIO=y
 CONFIG_DEV_LOOP=y
diff --git a/boards/sim/sim/sim/configs/mnemofs/defconfig b/boards/sim/sim/sim/configs/mnemofs/defconfig
index 7732caec0c567..60c1f2aff81ac 100644
--- a/boards/sim/sim/sim/configs/mnemofs/defconfig
+++ b/boards/sim/sim/sim/configs/mnemofs/defconfig
@@ -14,12 +14,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_GPIO=y
 CONFIG_DEV_LOOP=y
diff --git a/boards/sim/sim/sim/configs/nand/defconfig b/boards/sim/sim/sim/configs/nand/defconfig
index 94e94949c4d03..0d5c92df27654 100644
--- a/boards/sim/sim/sim/configs/nand/defconfig
+++ b/boards/sim/sim/sim/configs/nand/defconfig
@@ -14,12 +14,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_GPIO=y
 CONFIG_DEV_LOOP=y
diff --git a/boards/sim/sim/sim/configs/romfs/defconfig b/boards/sim/sim/sim/configs/romfs/defconfig
index 53583b184889e..c247fbba260d6 100644
--- a/boards/sim/sim/sim/configs/romfs/defconfig
+++ b/boards/sim/sim/sim/configs/romfs/defconfig
@@ -15,12 +15,15 @@ CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
 CONFIG_BOARDCTL_ROMDISK=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_LOOP=y
 CONFIG_ETC_FATDEVNO=2
diff --git a/boards/sim/sim/sim/configs/rust/defconfig b/boards/sim/sim/sim/configs/rust/defconfig
index a9691c0ab306b..5332d8bb60a95 100644
--- a/boards/sim/sim/sim/configs/rust/defconfig
+++ b/boards/sim/sim/sim/configs/rust/defconfig
@@ -14,12 +14,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_SYMBOLS=y
 CONFIG_DEV_GPIO=y
 CONFIG_DEV_LOOP=y
diff --git a/boards/sim/sim/sim/configs/smartfs/defconfig b/boards/sim/sim/sim/configs/smartfs/defconfig
index d03a09417dfbb..537c9d89577fc 100644
--- a/boards/sim/sim/sim/configs/smartfs/defconfig
+++ b/boards/sim/sim/sim/configs/smartfs/defconfig
@@ -14,12 +14,15 @@ CONFIG_ARCH_CHIP="sim"
 CONFIG_ARCH_SIM=y
 CONFIG_BOARDCTL_APP_SYMTAB=y
 CONFIG_BOARDCTL_POWEROFF=y
+CONFIG_BOARD_ETC_ROMFS_PASSWD_ENABLE=y
 CONFIG_BOARD_LOOPSPERMSEC=0
 CONFIG_BOOT_RUNFROMEXTSRAM=y
 CONFIG_BUILTIN=y
 CONFIG_CODECS_BASE64=y
 CONFIG_CRYPTO=y
 CONFIG_CRYPTO_CRYPTODEV=y
+CONFIG_CRYPTO_CRYPTODEV_SOFTWARE_CRYPTO=y
+CONFIG_CRYPTO_SW_AES=y
 CONFIG_DEBUG_ASSERTIONS=y
 CONFIG_DEBUG_FEATURES=y
 CONFIG_DEBUG_FS=y