Question Sprite sheet/flipbook ao masking or similar

Hello!

I'm looking for ways to blend or fade-out the alpha channel of a sprite-sheet as it comes into close proximity of 3D objects.

I've created this situation in Blender to illustrate what I mean:

I've created this flipbook/spritesheet of a soft cloud loop.
When a 3D object goes through the sprite it hard clips it creating this hard line, as one would expect.



In Blender I go into the Shader nodes for the sprite-sheet and add an Ambient Occlusion node which I blend with the original alpha layer of the sprite-sheet. This ambient occlusion node then takes into account the proximity of other objects in the scene and adds a gradient value (black for transparent) where they intersect. This small gradient fade-out results in the 2D sprite cloud not clipping and looking so much better.



My project is based in URP and has a few restrictions that I hope won't hinder this.
So I ask, what are the options here to achieve this effect in URP?