It will be possible to sign into an Apple ID using a physical security key as a second factor starting in iOS 16.3.
Use security keys as a second factor for sign-in
Apple restarted the beta process on Wednesday with the first beta of iOS 16.3. The release notes didn't reveal any changes, but users are reporting that physical security key support has been included in the beta.
By requiring a hardware security key, users would need something like a Yubikey to log into their devices or Apple's websites. Security keys can interface over USB, Lightning, or NFC -- meaning the device has to be physically present for the user to login.
When setting up a security key, users are asked to set up two so one is always available as a backup. Users will need two FIDO Certified security keys to perform the setup.
Apple says that the feature will be useful for people with a public profile, like celebrities, journalists, and members of government. The physical security key replaces one of the two factors for authentication and eliminates attack vectors that involve phishing.