VMware Fusion: Failed to power on VM (macOS Big Sur M1)

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VMWare Fusion Professional Version 12.1.2 (17964953) on macOS Big Sur (M1 chip) fails to create a virtual machine. Tried with Debian 64bit and openSUSE 64bit/32bit. Error popup: Failed to power on '/Users/user/Virtual Machines.localized/Debian 10.x.vmwarevm/Debian 10.x.vmx'

When I'm trying to lunch a VM created on another Mac with VMWare Fusion 11, I'm getting the same error.

Any ideas how to debug and what could be wrong?

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