Apple has released an update that allows a user to unlock their iPhone with their Apple Watch should they be wearing a mask at the time. This new iOS 14.5 setting requires the latest version of watchOS (7.4) to work. iPhones on the latest corresponding software upgrade can also now use App Tracking Transparency to allow or deny activity-tracking in a highly granular manner.
https://www.notebookcheck.net/The-latest-iOS-and-watchOS-updates-finally-add-a-mask-compatible-unlocking-option.535954.0.html