Challenge
Windows Server 2016 stops responding during the disk activity that involves block cloning for the Resilient File System (ReFS). That may happen, for example, when applying retention or creating a synthetic full backup.
Cause
This is the limitation of ReFS on Windows Server 2016 confirmed by Microsoft Support.
Solution
Install Windows Server 2019 with
KB4534321 that improves the performance of block cloning for ReFS in scenarios that involve a large number of operations on ReFS-cloned files.