From my personal experience the problem only seems to happen with the iPad Pro series, although a couple of people who have more modern iPads seem to be seeing it as well. This could be an issue associated with the GPUs in the A series processor and certain iPad models have different ones that do not do this.
For me when I accidentally clicked on the Wallpaper setting and closed the settings app, the problem immediately appeared. Even after updating to iPadOS 14.0.1 on both iPad Pro 9.7" and 11", it still exhibits the bug, so the problem is not solved with iPadOS 14.0.1.
As a test, I even reset the settings of the iPad Pro 11", but the issue still persists. This could be similar to the problem some on us face with the Home app being stuck on the Loading Accessories and Scenes screen, in that it is completely random who is affected. From the posts I have read, the problem seems to be associated with the iCloud settings held on the Apple servers. I say this based on the fact that I have that problem on different iPad's that are associated with the same iCloud account and local iPad resets don't solve that either.
But getting back to the problem at hand, from the responses on this post, it seems that anything that is not an iPad Pro or reasonably new iPad seems to be immune from the issue. As for the iPhone series, I am not sure what is causing the factor because quite a selection of models seem to have the problem, but again in a random basis. Again on iPhone series it could be a GPU chipset series issue.
The work-around that appears to solve the problem is that if you need to use the wallpaper setting, follow the points below.
1) Close the Settings app.
2) If the problem shows up, reboot the iDevice.
After a reboot, I have not seen the problem appear unless I revisit the Wallpaper Setting.
Other than that, we'll have to wait for Apple to solve it. However, I wouldn't hold my breath as Apple have been known to be glacial when it comes to solving certain problems. For instance the Zombie Apps problem associated with Inter App Audio was introduced back in iOS 7 and it has never been addressed.
