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I think they added better hardware key support at an OS level a little over two years ago. They needed all the web authn stuff for passkeys anyways, so I bet it was a necessity prerequisite.

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I just got the new M4 iPad like two months ago, and my YubiKeys absolutely did not work, no matter what I tried. There are articles on apple.com and yubikey.com that explain that USB-C YubiKeys will not work with USB-C iPads because Apple's USB-C implementation isn't sending the timing info (or something like that) that the YubiKey needs to function. People were buying Lightening YubiKey and connecting them to Apple's Lightening to USB-C "camera adapter" to work around this.

I decided to double-check my YubiKeys before I responded to your post and (!!!) they work now! This is huge!

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