As mentioned in https://kb.parallels.com/cn/130167:
macOS Sequoia 15 as a virtual machine
2 Can't sign in to iCloud on a macOS virtual machine on Apple Silicon Macs
Fixed in macOS 15 beta 3. Update both Mac and virtual machine to macOS 15 beta 3
We should be able to log in to iCloud when both the macOS is above macOS 15 beta 3
I'm using the 15.1 Beta 6 (24B5070a) on both the virtual machine and the host (The virtual machine is newly installed, not updated from old version).
The parallels desktop version is 20.1.0 (55732), by far the newest version.
When I first installed the virtual machine, I was able to log in to iCloud.
But when I installed the parallel desktop tools and rebooted the virtual machine, there was a warning asking me to enter the iCloud password again otherwise some iCloud funtions would be unavailable. I entered the password, but the "Verification Failed An unknown error occured" continues to pop up.
I deleted the virual machine and installed again, but this time the "Verification Failed An unknown error occured" continues to pop up every time I tried to login.