I really hope this pushes Microsoft to add a explicit permission system to VS Code extensions, and improve security of dev containers.
I really hope this pushes users (here: devs and maintainers) to decrease their reliance on Microsoft and especially stop outsourcing security to them. Migrate off vscode already.
It's not the IDE, though. Any extensible, customizable display editor can be coerced into behaving badly by installing external code. Even this one: https://www.gnu.org/software/emacs/emacs-paper.html
The root(-ish) cause here is the ease of publishing and installing extension code, and in particular the fact that there's no independent validation/verification step between the upstream author and armageddon. And upstream authors aren't set up with the needed precautions themselves, they're just hackers.
Basically if you phish Just One Account with write access to an extension you wan pwn everyone who's running it.