diff --git a/playwright/e2e/crypto/crypto.spec.ts b/playwright/e2e/crypto/crypto.spec.ts
index 9822f0522e..71a4e381d1 100644
--- a/playwright/e2e/crypto/crypto.spec.ts
+++ b/playwright/e2e/crypto/crypto.spec.ts
@@ -146,6 +146,29 @@ test.describe("Cryptography", function () {
         }).toPass();
     });
 
+    // When the user resets their identity, key storage also gets enabled.
+    // Check that the toggle updates to show the correct state.
+    test("Key backup status updates after resetting identity", async ({ page, app, user: aliceCredentials }) => {
+        await app.client.bootstrapCrossSigning(aliceCredentials);
+
+        const encryptionTab = await app.settings.openUserSettings("Encryption");
+        const keyStorageToggle = encryptionTab.getByRole("switch", { name: "Allow key storage" });
+        // Check that key storage starts off as disabled
+        expect(await keyStorageToggle.isChecked()).toBe(false);
+        // Find "the Reset cryptographic identity" button
+        await encryptionTab.getByRole("button", { name: "Reset cryptographic identity" }).click();
+
+        // Confirm
+        await encryptionTab.getByRole("button", { name: "Continue" }).click();
+
+        // Enter the password
+        await page.getByPlaceholder("Password").fill(aliceCredentials.password);
+        await page.getByRole("button", { name: "Continue" }).click();
+
+        // Key storage should now be enabled
+        expect(await keyStorageToggle.isChecked()).toBe(true);
+    });
+
     test(
         "creating a DM should work, being e2e-encrypted / user verification",
         { tag: "@screenshot" },
diff --git a/src/components/viewmodels/settings/encryption/KeyStoragePanelViewModel.ts b/src/components/viewmodels/settings/encryption/KeyStoragePanelViewModel.ts
index 60ad21236f..ca15b6a6e3 100644
--- a/src/components/viewmodels/settings/encryption/KeyStoragePanelViewModel.ts
+++ b/src/components/viewmodels/settings/encryption/KeyStoragePanelViewModel.ts
@@ -5,11 +5,13 @@ SPDX-License-Identifier: AGPL-3.0-only OR GPL-3.0-only OR LicenseRef-Element-Com
 Please see LICENSE files in the repository root for full details.
 */
 
-import { useCallback, useEffect, useState } from "react";
+import { useCallback, useState } from "react";
+import { CryptoEvent } from "matrix-js-sdk/src/crypto-api";
 import { logger } from "matrix-js-sdk/src/logger";
 
 import { useMatrixClientContext } from "../../../../contexts/MatrixClientContext";
 import DeviceListener, { BACKUP_DISABLED_ACCOUNT_DATA_KEY } from "../../../../DeviceListener";
+import { useEventEmitterAsyncState } from "../../../../hooks/useEventEmitter";
 
 interface KeyStoragePanelState {
     /**
@@ -37,31 +39,37 @@ interface KeyStoragePanelState {
 
 /** Returns a ViewModel for use in {@link KeyStoragePanel} and {@link DeleteKeyStoragePanel}. */
 export function useKeyStoragePanelViewModel(): KeyStoragePanelState {
-    const [isEnabled, setIsEnabled] = useState<boolean | undefined>(undefined);
     const [loading, setLoading] = useState(true);
     // Whilst the change is being made, the toggle will reflect the pending value rather than the actual state
     const [pendingValue, setPendingValue] = useState<boolean | undefined>(undefined);
 
     const matrixClient = useMatrixClientContext();
 
-    const checkStatus = useCallback(async () => {
-        const crypto = matrixClient.getCrypto();
-        if (!crypto) {
-            logger.error("Can't check key backup status: no crypto module available");
-            return;
-        }
-        // The toggle is enabled only if this device will upload megolm keys to the backup.
-        // This is consistent with EX.
-        const activeBackupVersion = await crypto.getActiveSessionBackupVersion();
-        setIsEnabled(activeBackupVersion !== null);
-    }, [matrixClient]);
+    const isEnabled = useEventEmitterAsyncState(
+        matrixClient,
+        CryptoEvent.KeyBackupStatus,
+        async (enabled?: boolean) => {
+            // If we're called as a result of an event, rather than during
+            // initialisation, we can get the backup status from the event
+            // instead of having to query the backup version.
+            if (enabled !== undefined) {
+                return enabled;
+            }
 
-    useEffect(() => {
-        (async () => {
-            await checkStatus();
+            const crypto = matrixClient.getCrypto();
+            if (!crypto) {
+                logger.error("Can't check key backup status: no crypto module available");
+                return;
+            }
+            // The toggle is enabled only if this device will upload megolm keys to the backup.
+            // This is consistent with EX.
+            const activeBackupVersion = await crypto.getActiveSessionBackupVersion();
             setLoading(false);
-        })();
-    }, [checkStatus]);
+            return activeBackupVersion !== null;
+        },
+        [matrixClient],
+        undefined,
+    );
 
     const setEnabled = useCallback(
         async (enable: boolean) => {
@@ -121,14 +129,12 @@ export function useKeyStoragePanelViewModel(): KeyStoragePanelState {
                     // so this will stop EX turning it back on spontaneously.
                     await matrixClient.setAccountData(BACKUP_DISABLED_ACCOUNT_DATA_KEY, { disabled: true });
                 }
-
-                await checkStatus();
             } finally {
                 setPendingValue(undefined);
                 DeviceListener.sharedInstance().start(matrixClient);
             }
         },
-        [setPendingValue, checkStatus, matrixClient],
+        [setPendingValue, matrixClient],
     );
 
     return { isEnabled: pendingValue ?? isEnabled, setEnabled, loading, busy: pendingValue !== undefined };
diff --git a/test/unit-tests/components/viewmodels/settings/encryption/KeyStoragePanelViewModel-test.ts b/test/unit-tests/components/viewmodels/settings/encryption/KeyStoragePanelViewModel-test.ts
index fee28cf38f..eb9c81c4a7 100644
--- a/test/unit-tests/components/viewmodels/settings/encryption/KeyStoragePanelViewModel-test.ts
+++ b/test/unit-tests/components/viewmodels/settings/encryption/KeyStoragePanelViewModel-test.ts
@@ -5,9 +5,10 @@ SPDX-License-Identifier: AGPL-3.0-only OR GPL-3.0-only OR LicenseRef-Element-Com
 Please see LICENSE files in the repository root for full details.
 */
 
-import { renderHook } from "jest-matrix-react";
+import { renderHook, waitFor } from "jest-matrix-react";
 import { act } from "react";
 import { mocked } from "jest-mock";
+import { CryptoEvent } from "matrix-js-sdk/src/crypto-api";
 
 import type { MatrixClient } from "matrix-js-sdk/src/matrix";
 import type { BackupTrustInfo, KeyBackupCheck, KeyBackupInfo } from "matrix-js-sdk/src/crypto-api";
@@ -37,6 +38,23 @@ describe("KeyStoragePanelViewModel", () => {
         expect(result.current.busy).toBe(true);
     });
 
+    it("should update if a KeyBackupStatus event is received", async () => {
+        const { result } = renderHook(
+            () => useKeyStoragePanelViewModel(),
+            withClientContextRenderOptions(matrixClient),
+        );
+        await waitFor(() => expect(result.current.isEnabled).toBe(false));
+
+        const mock = mocked(matrixClient.getCrypto()!.getActiveSessionBackupVersion);
+        mock.mockResolvedValue("1");
+        matrixClient.emit(CryptoEvent.KeyBackupStatus, true);
+        await waitFor(() => expect(result.current.isEnabled).toBe(true));
+
+        mock.mockResolvedValue(null);
+        matrixClient.emit(CryptoEvent.KeyBackupStatus, false);
+        await waitFor(() => expect(result.current.isEnabled).toBe(false));
+    });
+
     it("should call resetKeyBackup if there is no backup currently", async () => {
         mocked(matrixClient.getCrypto()!.checkKeyBackupAndEnable).mockResolvedValue(null);