Confirm MacBook Password – does not accept anything

Ventura 13.1

keeps asking me to "confirm macbook password" but it does not accept anything.

Tried several times, even restarted the computer to check if the password I'm using to unlock is correct and it is correct – this dialog does not accept it.

Tried apple ID password as well, no luck.

It says it's needed for iCloud which I don't get why… I don't want to loose my iCloud files as most of my work is being stored there.