The original edit was made in visual mode. If you see <blockquote> in the visual mode, you should see <blockquote> after saving as well. (Note that the URL above the quotation was also escaped.) In source mode, I was able to reply you with an unescaped <blockquote> two years ago; if there hasn’t been a regression since then, it should work today as well. (Although I used the plain <textarea>-based editor, not the 2017WE-based one, so in theory there could be a regression, but it’s quite unlikely.)

Actually, a warning could could appear when you type HTML tags, similarly to how it appears for wikitext markup, but adding <nowiki> is certainly a feature, not a bug.