I was able to solve this issue thanks to your insightful response. It turns out my issue was limited to the screenshot grabbing software that I am using: the name is "CleanShot"
The reason for the issue was that when a screenshot is taken, CleanShot commits both the image data and temporary image file into the clipboard. When pasted many applications know what to do with this, but Joplin could not paste it.
I changed this default behavior on CleanShot to only copy Image data into the clipboard. See screenshot below. This solved the pasting issue on Joplin.
Thank you Laurent!