This test currently fails:

abstract class A[X]:
  def foo(x: X): X

class IO
class C
def test(io: {*} IO) =
  class B extends A[{io} C]:    // error, but should work
    override def foo(x: {io} C): {io} C = ???

with the error message

7 |  class B extends A[{io} C]:
  |        ^
  |class B needs to be abstract, since def foo(x: X): X in class A is not defined
  |(Note that
  | parameter X in def foo(x: X): X in class A does not match
  | parameter {io} C in override def foo(x: {io} C): {io} C in class B
  | )
*/

Arguably there should be a way to achieve such overridings. You can think of it as inserting a bridge method in B that implements the method in A by forwarding to the method in B and box-adapting argument and result. However, it seems that such a box adaptation could in general require some capability in B that was not required before. So this would need to be worked into the general capability propagation framework.

Looks like this test compiles now. I am adding the test to #18192 and am closing this one.