Hello, Stoyan,

I tested this scenario on my end and confirm there is an issue with RadTextBoxControl when entering an empty space. I have logged it in our feedback portal by making this thread public. You can track its progress, subscribe for status changes and add your comments on the following link: https://feedback.telerik.com/winforms/1504308-radtextboxcontrol-the-spaces-are-not-converted-to-passwordchar-when-usesystempasswordchar-true 

I have also updated your Telerik Points.

Currently, you can use the RadTextBox instead RadTextBoxControl.

 this.radTextBox1.UseSystemPasswordChar = true;

I hope this helps. Should you have any other questions please let me know.

Regards,
Nadya
Progress Telerik