How does it detect passwords? Usually those are just plain-text when copied.

https://hluk.github.io/CopyQ/

Either way, I think it is better to not copy passwords to the clipboard or the selection, but store and transfer them via password-manager/browser/etc APIs.

With KDE on Wayland, there is a clipboard hint MIME type `x-kde-passwordManagerHint` for passwords that clipboard managers can choose to drop.