While creating a new MCS catalog, administrators may see "Failed to create the provisioning scheme" error at Step 5 ( Copying the Master Image). The detailed error message shows the following failure stack:
Failed to create the provisioning scheme.
Stack Trace:
at Citrix.Orchestration.Base.PowerShellSdk.ProvisioningSchemeService.BackgroundTasks.ProvisioningSchemeTask.ThrowOnTerminatingError(SdkProvisioningSchemeAction sdkProvisioningSchemeAction)
at Citrix.Orchestration.Base.PowerShellSdk.ProvisioningSchemeService.BackgroundTasks.ProvisioningSchemeTask.WaitForProvisioningSchemeActionCompletion(Guid taskId, Action`1 actionResultsObtained)
at Citrix.Orchestration.Base.PowerShellSdk.ProvisioningSchemeService.BackgroundTasks.ProvisioningSchemeCreationTask.StartProvisioningAction()
at Citrix.Orchestration.Base.PowerShellSdk.ProvisioningSchemeService.BackgroundTasks.ProvisioningSchemeCreationTask.RunTask()
at Citrix.Orchestration.Base.PowerShellSdk.BackgroundTaskService.BackgroundTask.Task.Run()
StudioErrorId : ProvisioningTaskError
ErrorCategory : NotSpecified
TaskState : FailedToCreateImagePreparationVm
TaskStateInformation : Terminated
ErrorId : FailedToCreateImagePreparationVm
Operation : PreparingMasterImage
ErrorMessage : Error while copying content to a stream.
Just before the failure, administrators may see that the Preparation VM created on the hypervisor is waiting for user inputs prompting for Bitlocker decryption key.
Note: After the default timeout (20 mins), the preparation VM will be shutdown and deleted. So the hypervisor needs to be constantly monitored for the Preparation VM and it's state to validate if it is stuck on the Bitlocker decryption key prompt screen.
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MCS does not support Bitlocker encryption of the image as of CVAD 2402. This may change in the future versions.
Disabling Bitlocker encryption of the image resolved the problem.
Click on Start > Privacy Security > Device Encryption
Click on Turn Off Bitlocker option
While creating a new MCS catalog, administrators may see "Failed to create the provisioning scheme" error at Step 5 ( Copying the Master Image)

For more information on Bitlocker Encryption settings, refer to the following Microsoft article:
https://support.microsoft.com/en-us/windows/device-encryption-in-windows-cf7e2b6f-3e70-4882-9532-18633605b7df
Refer to the following article for other possible configurations that can result in MCS Catalog creation task failure:
https://support.citrix.com/external/article/202656/catalog-creation-mcs-preparation-of-mast.html