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MacOS on 2013 and newer Macs have the following setting at the bottom in system preferences:

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Question

  • How does "Allow your Apple Watch to unlock your Mac work?

From what I've seen, it has a dependency on iCloud, as mentioned in several support articles.

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From Apple's support article on the topic, it appears that prior to being allowed to enable this setting, the user must have 2FA enabled. From the same page, a user must be signed into iCloud on both devices. So yes - that's a requirement. As an enterprise admin, if your users are using the watch unlock feature, then you can assume that they have 2FA enabled.

Quoting from this other answer, your Mac calculates the distance of your watch from it, after pairing with it over Bluetooth. In more detail:

The 802.11v timestamp has been proposed to be used as a “time of flight” calculation all the back since 2008. Apple has decided to use Time of Flight as a security mechanism for the Watch Unlock feature. Rather than just assume that the Watch is in range because it’s communicating over Bluetooth, Apple wanted to increase the security of the Watch/Mac connection. When the Mac detects that the Watch is within 3 meters of the Mac it is connected to via Handoff it is in the right range to trigger an unlock.

When the Watch sends a Bluetooth signal to trigger the unlock, the Mac sends an additional 802.11v request to the watch via wireless. This request is then timed for arrival. Since the Mac knows the watch has to be within 3 meters, the timestamp on the packet has a very tight tolerance for delay. If the delay is within the acceptable parameters, the Watch unlock request is approved and your Mac is unlocked. If there is more than the acceptable deviation, such as when used via a Bluetooth repeater or some other kind of nefarious mechanism, the unlock request will fail because the system realizes the Watch is outside the “safe” zone for unlocking the Mac.

Source

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