Module-provided blocks don't show in reference fields

I'm finding that when I:
1) Create a custom block in a module
2) Create an entity reference field to reference blocks
3) Reference my custom block using that field on a piece of content
4) Do not place the block at admin/structure/block/list/mytheme OR do place the block in the 'disabled' region

Two things happen:
1) When I revisit the content edit page, the field shows the block as "- Restricted Access - (blockID)"
2) When viewing the content, the block is not shown

However, I do find that if I place the block in the content region and then view my content, it shows twice! (Once for the block placement, again in my custom field)

I would assume that when using a block reference field I should not need to place a block in a region to be able to use it?

Final thoughts:
I'm not entirely sure if perhaps I'm just not fully understanding the mechanics of how I should set this up!
I've raised the issue here, but suppose there is a chance it's more related to the reference field than to the block module, but I don't know enough.