The base issue is that, a connection from VS Code is denied because the plattform is not supported if conditional access is enabled on the underlying Entra ID tenant.

Kamil has described the problem in detail here on the Microsoft/AL repo, issue 7344:

1. Describe the bug

When we need to debug customer's tenant environments, we cannot, because connection from VSCode to the tenant is denied. Customer is using Conditional Access Policy which prevents connections from "unsupported" platforms. In AAD log there is info that the connection failed because this policy. We are using Delegated Admin account for authentication.

2. To Reproduce

1. Set tenant with Conditional Access Policy set as described MS Learn
2. Create BC environment in the tenant
3. Try to connect from VSCode to BC environment in the tenant to debug
4. The connection fails, in AAD you can find log about the failure because Unsupported platform policy failed

3. Expected behavior

Connection from the VSCode is accepted because it is from supported platform

Currently, Microsoft has the issue on their backlog but without priority, so they suggested to create an BC idea.

Please upvote the idea to allow the connection from VS Code without compromises on security for us partners. Thank you!