Can't use Touch ID to unlock MacBook Pro since last update

[Jeven Stobs]

Since updating to 12.3.1 I can't use Touch ID on my 2017 MBP to unlock the machine anymore. I can still use it in other places, like Notes or SysPref, but not when the Mac was asleep or locked. I didnt change any settings and resetting them and setting them up anew didnt do anything. The entire TouchBar actually appears blank until I press a keyboard key.
Does anyone know how to fix this?

 

[Jeven Stobs]

Eventually after some time it show in the Settings that unlocking my Mac turned off, despite it previously showing it was on and other stuff was off which is on now. Strange, I don't like that Monterey keeps changing keyboard settings on my Mac.