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Handheld Augmented Reality (AR) is often presented using the magic-lens paradigm where the handheld device is portrayed as if it were transparent. However, the majority of handheld devices are not transparent which creates a requirement to produce a virtual transparency. Such a virtual transparency is usually implemented using video from monocular camera which is then rendered on the device screen. The consequence of such an approach is that it removes binocular-disparity, which may undermine user’s ability to correctly estimate depth within the world seen through the magic lens. To confirm such an assumption this paper presents a qualitative user study that compares a phone magic-lens and transparent replica magic-lens. The observational results and questionnaire analysis confirm that the removal of binocular-disparity affects participants’ depth perception when interacting within AR workspace. These results led to the subsequent implementation of a stereoscopic magic-lens prototype on a commercially available mobile device to demonstrate potential enhancements of such a system.