US Treasury Proposes Rule Widening Outbound Investment Curbs

The US Treasury has proposed a rule that would widen its curbs on American investment in sensitive technologies beyond China. The draft, released on 22 October, implements the Comprehensive Outbound Investment National Security (COINS) Act. It is a proposal, not a final rule, and the public has until 7 December 2026 to comment.

The proposal turns an existing Treasury programme, which since January 2025 has covered deals involving China, Hong Kong and Macau, into the framework Congress wrote into law last December. It would add more countries and more technology sectors. It would also ban, rather than merely require notice of, US investment in companies in those countries that develop any AI system, which the rule calls a “super intelligence (SI) system”.

The rule would cover six sectors and more countries

The COINS Act was passed as part of the National Defense Authorization Act for Fiscal Year 2026 and enacted on 18 December 2025. It names five sectors: semiconductors and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Using a power in the act to add technologies, the Treasury Secretary has proposed biotechnology as a sixth.

The act’s list of “countries of concern” adds Cuba, Iran, North Korea, Russia and “the Bolivarian Republic of Venezuela under the regime of Nicolás Maduro Moros” to China, including Hong Kong and Macau. Treasury’s fact sheet says the Maduro regime “no longer exists” and that Venezuela therefore does not meet the proposed definition. It still tells investors to check whether the rule could reach deals involving Venezuelan entities.

Covered deals would include buying equity, some convertible debt, joint ventures, greenfield investments and some investments as a limited partner in non-US funds. Notifications would be due within 30 days of a deal closing.

“Super intelligence” replaces “AI” in the draft

The new term comes from Executive Order 14434, “Inaugurating the Era of Super Intelligence”, signed on 29 September. Section 2 tells agencies to use “Super Intelligence” and “SI” in place of “Artificial Intelligence” and “AI” in non-statutory documents. The order defines SI as the technologies covered by the existing federal legal definition of artificial intelligence. Treasury’s footnote says the proposed rule uses “super intelligence systems” in place of the “AI Systems” term in its current regulations.

The substance changes too. The current rules sort AI deals by how much computing power trained a model and what it is meant to be used for. The proposed rule drops that approach, saying “no single measure, benchmark, or threshold is currently sufficient to distinguish advanced models”. It would instead prohibit investment in covered companies developing “any SI system”, ending the separate notification tier for these deals. The draft definition covers machine-based systems that “generate content” and extends to an agentic “harness” built on a model. Clarifying text says that building such a harness on a third-party model would count as development, while using an off-the-shelf system “strictly for internal, non-commercial purposes” would not, on that basis alone. Treasury says it “particularly welcomes” comment on this approach.

Elsewhere, the draft keeps existing chip and quantum bans and extends them to items including high-bandwidth memory and photonic chips, and to quantum algorithms. It adds a notice requirement for high-speed interconnects used in supercomputing.

Bessent says the rule targets adversaries, not all investment

“Under President Trump’s leadership, we are committed to putting America’s national security first,” said Treasury Secretary Scott Bessent. “The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security.”

Treasury says the programme would not ban all investment in these countries. Exceptions include publicly traded securities, index funds, mutual funds and ETFs, and limited-partner stakes where committed capital “does not exceed $2 million”. Deals worth up to $50,000 over 12 months would be exempt from notification, but not from the bans. Violations could bring civil penalties up to the maximum under the International Emergency Economic Powers Act (IEEPA), and Treasury could force divestment.

The proposal sits alongside other US moves on China and advanced technology that TSN has covered, from the MATCH Act on chipmaking equipment to sanctions on an ex-Google engineer’s AI start-up and its investor and a guilty plea over Nvidia servers sent to China.

A blanket SI ban swaps a technical test for an ownership test

Under the current rules, an investor had to judge a target’s training compute and intended uses. The proposal largely removes that question for AI. If a covered company develops any SI system, the deal would be prohibited. Treasury’s stated reason is practical: the measures it relied on no longer separate advanced models from ordinary ones. That makes compliance simpler to describe but broader in reach. Because the definition reaches content generators and agentic harnesses, a company in a country of concern that sells a product built on top of someone else’s model could fall inside the ban. The line between internal use and commercial development will matter most to investors, because it decides which deals stay legal. Deals that today need only a notice would, under the draft, be barred outright. That is the trade-off Treasury is asking commenters to weigh: a simpler test in exchange for a much wider ban. For context on AI rules elsewhere, see TSN’s AI Regulation hub.

Investors, not Treasury, would carry the screening burden

The proposal would not create a review process for deals. The fact sheet says the US person must decide whether a transaction is prohibited, notifiable or outside the rule. Treasury does not intend to publish a list of covered companies “at this time”. Its knowledge standard would include what an investor “could have possessed” through “a reasonable and diligent inquiry”. Together, those choices put the burden of due diligence on funds, banks and limited partners. A non-binding feedback process and a national interest exemption offer some relief, but only on request. For a US fund whose limited partners include people with stakes in Chinese technology companies, the $2 million limited-partner threshold and the inquiry standard are the details to watch.

Treasury has sent the proposal to the Federal Register under docket TREAS-DO-2026-0595. Investors who want to influence its scope have until 7 December to say whether “any SI system” is the right line to draw.

Sources

• US Treasury: Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act (22 Oct 2026)
• US Treasury: Fact Sheet and FAQs, COINS Act NPRM (PDF)
• US Treasury: Outbound Investment Security Program proposed rule, pre-publication text (PDF)
• Congress.gov: Public Law 119-60, National Defense Authorization Act for Fiscal Year 2026
• The White House: Executive Order 14434, Inaugurating the Era of Super Intelligence

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