Fixed in today's v97 stable release. Hooray
After update to v97 on stable update stream, the option to enter the sync passphrase is back. After entering my passphrase, the synchronization resumed.

It seems there is a fix on developer:
https://blogs.opera.com/desktop/changelog-for-98/
DNA-104983 Missing encyrption option in sync settings
Hopefully it will come to stable soon.

Fixed in today's v97 stable release. Hooray
After update to v97 on stable update stream, the option to enter the sync passphrase is back. After entering my passphrase, the synchronization resumed.

It seems there is a fix on developer:
https://blogs.opera.com/desktop/changelog-for-98/
DNA-104983 Missing encyrption option in sync settings
Hopefully it will come to stable soon.

I can confirm, the same here.
Opera v96 on my Win 10 machine tells me "Synchronization has encountered a problem" and prompts me to log in again. I entered my credentials, but there is no input for the sync passphrase in the Opera settings anymore.
Now the settings page says I am signed in, but the information under the Opera Account icon remains Synchronization has encountered a problem and my data is not synchronized.
I can still see my computer at https://www.sync.opera.com/devices
No problem od my Android device.

Version:96.0.4693.31
Opera is up to date
Update stream:Stable
System:Windows 10 64-bit
Chromium version:110.0.5481.178