How to remove “Category:” title prefix in Twenty Sixteen theme?

That title is coming from archive.php file of TwentySixteen theme.

You can find a <header> code section in that file.

What you can do, simply copy the archive.php file as category.php
and then remove the following code section from category.php file:

<header class="page-header">
    <?php
        the_archive_title( '<h1 class="page-title">', '</h1>' );
        the_archive_description( '<div class="taxonomy-description">', '</div>' );
    ?>
</header><!-- .page-header -->

In case you want to show only Category name as page title, then instead of removing the above code from category.php file, just replace the the_archive_title method with:

printf('<h1 class="page-title">%1$s</h1>', single_cat_title('', false));