This has been happening in 1.16 as well.

I own a 10-person Realm, and we've been having this issue since the beginning. Most of us use a custom skin we made outside of Minecraft. When we do, the skin either becomes invisible and there are no animations to the character (The only way we can see them is their shadow and the armor they wear) or the skin defaults to a Steve skin, This appears to be random. This only happens sometimes to some skins (for example, my skin usually works, but my friends never works.) A few of us have gotten tired of this bug and have just made a marketplace skin for the Realm.

We all have the setting "Only Allow Trusted Skins" off, and the problem still persists. The first skin (skin 1) works just fine (It was from the marketplace), while the second one (skin 2) has defaulted to Steve. He is using his own custom skin. I also have attached my skin.