When you block reference to a header, the formatting will also be like the header in the text you’re referencing from. This should be regular text instead, like with page references
Depends on the theme you use the block reference blends in pretty well (I’ve tried with the Default Theme, Nord Theme, and Dev Theme).
If you use other themes that carries the heading format when you use block reference I’d recommend you render a block as a heading by right click on the bullet point → Convert to a heading instead of using #. When you use block reference to refer to this heading you’ll see that it is regular text.
This even has a benefit of going deeper than 7 level deep when you zoom in (while using 8 # would not render it as a heading).