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Thanks for including a screenshot of the error you're seeing. Just to ensure we're targeting the right issue, you're facing a problem when attempting to authenticate VS Code against Jira which results in your shared error.
You may have already done this, but ensure you're completing the steps below:
Authenticate with VS Code
Next, you’ll need to authenticate the VS Code extension with Jira and/or Bitbucket.
Authenticate Jira Cloud
Open Atlassian Settings. Open the command palette (macOS: Command + Shift + P; Windows: Ctrl + Shift + P), search for Atlassian Settings, and hit Enter.
Open the Jira tab, then open the Authentication section if it's not visible.
Click Login to Jira Cloud. This will open the Atlascode Integration page in your browser. If you aren't already logged in, you'll be prompted to log in to your Atlassian account.
On the Atlascode Integration page, click the Authorize for dropdown menu to open the list of sites (instances) you can authenticate with VS Code.
Select the site you want to authenticate.
Click Accept to complete authentication.
Click Back to VS Code to return to VS Code.
If you’d like to authenticate another Jira site, click Login to Jira Cloud again and select another site.
Alternatively, you may also be impacted by the following issue: Allow SAML SSO as authentication method which is associated with Ability to login VS Code plugin with Custom Jira Site through third-party authentication provider.
I have excactly this issue, I am not using any thirdpart authentication, I have a Jira account. When I try to login from the VSCode Jira extention, I am directed to below after page after I login to my Jira account. Once I accept the integration, my browser simply hangs waiting for api.atlassian.com to respond, but eventually times out.