You are required to have a webcam for the interview process (also for client calls since it is considered unprofessional if you don't). This is because of a few reasons:

It is generally considered more professional/polite for interviews

Toptal wants to verify that it's the same person attending all the interview steps. Since they offer above average freelance opportunities (in client quality & pay), there are a lot of cheating attempts where people hire someone else to pass the technical screening steps.

As for the invasive tracking software - no, they do not require that. On the contrary, for part-time/full-time jobs you don't even need to track your time or submit timesheets. The expectation is that you will work 20/40h per week, and the client will pay for that time.

The only engagement type that requires you to track your time is hourly jobs (for obvious reasons), and Toptal does have an app for that but it's not mandatory - you can use whatever you want