Source

File: wp-includes/rest-api/endpoints/class-wp-rest-posts-controller.php

public function can_access_password_content( $post, $request ) {
		if ( empty( $post->post_password ) ) {
			// No filter required.
			return false;
		}

		// Edit context always gets access to password-protected posts.
		if ( 'edit' === $request['context'] ) {
			return true;
		}

		// No password, no auth.
		if ( empty( $request['password'] ) ) {
			return false;
		}

		// Double-check the request password.
		return hash_equals( $post->post_password, $request['password'] );
	}