Treasury Proposes Rules to Expand Outbound Tech Investment Curbs

The U.S. Department of the Treasury issued a Notice of Proposed Rulemaking on October 22, 2026 that would expand the Outbound Investment Security Program, adding new technology sectors and countries of concern to the restrictions governing certain U.S. investments abroad.

The proposed rule implements the Comprehensive Outbound Investment National Security (COINS) Act, which Congress passed as part of the Fiscal Year 2026 National Defense Authorization Act. The statute directs the Treasury Secretary to issue regulations that require U.S. persons to notify Treasury of certain transactions involving covered foreign persons engaged in notifiable technologies and that prohibit U.S. persons from certain other transactions involving covered foreign persons engaged in prohibited technologies. The Treasury announcement states that in passing the act, Congress described restricting certain outbound investments into dual-use strategic technologies that benefit a foreign adversary’s military modernization efforts, surveillance states, and human rights abuses as necessary to prevent harm to U.S. national security and foreign policy interests.

“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 Secretary Scott Bessent said in Treasury’s announcement. Assistant Secretary of the Treasury for Investment Security Christopher Pilkerton said the proposed regulations are designed to address risks that arise when foreign adversaries try to benefit from U.S. investment in key technology sectors.

From the 2023 Outbound Order to the COINS Act

The program began with an executive order issued on August 9, 2023, in which the President declared a national emergency over countries of concern seeking to develop and exploit sensitive or advanced technologies critical for military, intelligence, surveillance, or cyber-enabled capabilities. That order identified three categories of national security technologies — semiconductors and microelectronics, quantum information technologies, and artificial intelligence — and its annex named the People’s Republic of China, along with Hong Kong and Macau, as a country of concern. Treasury issued a final rule implementing the order on October 28, 2024, with an effective date of January 2, 2025, according to Treasury’s Outbound Investment Security Program page.

On December 18, 2025, Congress enacted the COINS Act as part of the defense authorization act, codifying the program in the Defense Production Act. The statute directed Treasury to issue or update implementing regulations, subject to public notice and comment, not later than 450 days after enactment. The proposed rule does not itself implement the statute. Treasury’s FAQ states that a later final rule will set the effective date, and that the existing regulations will continue to apply to U.S. person activities occurring on or after January 2, 2025 and before that effective date.

New Technology Sectors and Countries of Concern

The COINS Act authorizes the Secretary to set technical parameters for prohibited and notifiable technologies in five sectors: semiconductor technologies and microelectronics, artificial intelligence systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. It also lets the Secretary add technologies that enable the military, intelligence, surveillance, or cyber-enabled capabilities of a country of concern, and Treasury used that authority to add biotechnology. Because an executive order issued on September 29, 2026 requires agencies to use “Super Intelligence” and “SI” in place of “Artificial Intelligence” and “AI” in certain documents, the proposed rule uses the term “super intelligence systems” in place of “AI systems,” according to the official fact sheet and FAQ.

For semiconductors, the proposal maintains existing prohibitions covering certain electronic design automation software, fabrication and advanced packaging equipment, and the design or fabrication of certain advanced integrated circuits, while expanding them to radiation-hardened integrated circuits, photonic integrated circuits, high-bandwidth memory, and additional categories of advanced integrated circuits. For SI systems, it expands the existing prohibition to more broadly restrict investment in country-of-concern entities developing any SI system, eliminating the existing notification requirement for those transactions. The quantum prohibition would extend to the development of algorithms or applications for quantum computing, and the supercomputing provisions add a notification requirement for high-bandwidth, low-latency interconnects.

The proposal adds a new prohibition on investment in hypersonic systems, propulsion systems capable of enabling hypersonic flight, certain related and enabling technologies, materials designed to withstand atmospheric conditions at hypersonic speeds, and testing facilities, alongside a notification requirement for sensors, control equipment, software, and additional dual-use materials. It also adds a biotechnology prohibition covering certain bio-derived compounds or materials, brain-computer interfaces, biomanufacturing equipment and facilities, bioinformatics tools, and hardware or software for automated scientific discovery or experimentation.

The COINS Act and the proposed rule define countries of concern as China including Hong Kong and Macau, Cuba, Iran, North Korea, Russia, and Venezuela under the regime of Nicolás Maduro Moros. The FAQ states that the Maduro regime no longer exists, that the United States recognized Delcy Rodríguez as Venezuela’s head of state on March 5, 2026, and that Venezuela therefore does not meet the proposed definition, though it notes the rule could still apply to certain investments outside a country of concern.

Covered Transactions, Persons, and Exceptions

Obligations would fall on U.S. persons (citizens, lawful permanent residents, entities organized under U.S. law including their foreign branches, and any person in the United States) and on their controlled foreign entities. The obligations apply where a person has knowledge of the relevant facts, defined as actual knowledge, awareness of a high probability, or information obtainable through a reasonable and diligent inquiry.

Covered national security transactions include the acquisition of equity or contingent equity interests, certain debt financing convertible to equity or carrying certain lender rights, entrance into a joint venture, conversion of a contingent equity interest, greenfield investment or other corporate expansion, a U.S. person’s knowing direction of certain transactions by a foreign person, and certain limited-partner investments in non-U.S. pooled investment funds. A covered foreign person includes citizens or permanent residents of a country of concern, entities incorporated or principally located there, individual members of the Central Committee of the Chinese Communist Party or other country-of-concern political leadership, country-of-concern governments and persons acting on their behalf, entities directly or indirectly majority-owned or controlled by any of those persons, and entities holding a voting interest, board seat, or equity interest in covered foreign persons where more than 50 percent of one of several key financial metrics is attributable to them.

The proposed rule excepts publicly traded securities; investment company securities such as index funds, mutual funds, and exchange-traded funds; limited-partner investments of no more than $2 million in committed capital or backed by a binding contractual assurance; derivatives of excepted securities; full buyouts of covered foreign person ownership in entities or assets located outside a country of concern; certain intracompany transfers; pre-existing binding capital commitments; certain syndicated debt financings; equity received as employment compensation; transactions that do not exceed $50,000 in aggregate over the preceding 12 months (an exception from the notification requirement only); certain secondary and ancillary transactions; certain third-country transactions; and transactions completed before the COINS Act’s December 18, 2025 enactment.

The program is not a transaction-screening regime: each U.S. person must determine whether a transaction is prohibited, notifiable, or outside the rule’s scope. A person with a direct financial interest in an actual, non-hypothetical transaction may request non-binding feedback from Treasury on whether it would be prohibited, and a U.S. person may seek a national interest exemption. Treasury does not intend to publish a database of covered foreign persons, though the proposed rule creates a process for confidential submissions about whether a foreign person is covered.

Notifications, Penalties, and Comment Deadline

A U.S. person subject to the notification requirement would file a notification no later than 30 days after a transaction is completed, or within 30 days after acquiring actual knowledge that a completed transaction would have been covered. Violations would be subject to civil penalties up to the maximum amount under the International Emergency Economic Powers Act, and the Secretary may compel divestment of a covered national security transaction in a prohibited technology. The proposed rule also creates a voluntary self-disclosure process that Treasury would take into consideration in determining its response.

Written comments on the proposal are due by December 7, 2026 and may be submitted through regulations.gov, anonymously or with attribution. Treasury said it will consider the input before issuing final implementing regulations, which will set the program’s effective date.