Using abstract types to encode explicit capture polymorphism fails

[bracevac]

Compiler version

Latest NIGHTLY.

Minimized code

import language.experimental.captureChecking
import caps._

trait Foo extends Capability

trait CaptureSet:
  type C <: CapSet^

def capturePoly[C^](x: Foo^{C^}): Foo^{C^} = x
def capturePoly2(c: CaptureSet)(x: Foo^{c.C^}): Foo^{c.C^} = x

def test =
  val x: Foo^ = ???

  object X extends CaptureSet:
    type C = CapSet^{x}

  val y: Foo^{x} = capturePoly(x)     // ok
  val z: Foo^{x} = capturePoly2(X)(x) // error

Output

-- [E007] Type Mismatch Error: local/ccpaths.scala:19:35 -----------------------
19 |  val z: Foo^{x} = capturePoly2(X)(x)
   |                                   ^
   |                                   Found:    (x : Foo^)
   |                                   Required: Foo^{c.C^}
   |
   | longer explanation available when compiling with `-explain`

Expectation

It should be accepted.