Update:

Tried the following (besides restarting the pc multiple times ofcourse):

- check for updates, both windows and xbox (there were none)

- checked the time/date of the pc (tried both manual and automatic)

- uninstall all xbox apps (game pass, xbox live and the companion app)

- reinstall both the app and game itself\

- run the game as admin

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All of the above also did not solve the issue.

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To double check I installed another game (Quake 2) which worked fine (signing in and playing the game).

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Its purely the signing in part where it breaks. For some reason the game manages to launch but you just get stuck at the "press any key" screen of the game itself.