"Linked Devices" for passkeys disappear from Registry

When accessing a resource protected by a CAP that requires a passkey for the first time from a Win 11 25H2 device, a user is presented with a choice of either a security key or iOS/Android device via QR code. If user selects the QR code option and successfully completes the prompts from an Android phone, the device is added as a "linked device" in the registry (HKEY_USERS\S-1-5-20\Software\Microsoft\Cryptography\FIDO\S-1-5-21-...-1000\LinkedDevices).

On any subsequent sign-in attempt, the user is presented with the same screen as the first time, however, now they are able to select the linked device (assuming same Win 11 device is used).

Then, randomly, the ability to select a linked device disappears, the user is no longer able to select it and complete the passkey authentication without scanning the QR code.

I haven't been able to find a way to re-add the device back as a Linked Device - tried deleting the registry keys, unlinking/relinking the phone using "Phone Link", removing Bluetooth registration from phone and Win 11 device.

The only strange thing that I noticed, and I am not sure how this happened, but originally, the "Linked Devices" registry key was under HKEY_USERS\S-1-5-20\Software\Microsoft\Cryptography\FIDO\S-1-5-21-...-1000\LinkedDevices; then after an update the LinkedDevices key was created in HKEY_USERS\S-1-5-20\Software\Microsoft\Cryptography\FIDO\S-1-5-21-...-1001 with no values. 1001 is the current user experiencing the issue.

Any idea on how to restore this functionality?