What Happened?

If you are a U.S. investor who puts money into artificial intelligence, semiconductors, quantum computing, hypersonic systems, high-performance computing, or biotechnology firms in China, Cuba, Iran, North Korea, Russia, or Venezuela, a proposed federal outbound investment rule would require you to notify the government of those deals or ban them. The U.S. Department of the Treasury (Treasury) published the proposed Outbound Investment Security Program Regulations on Oct. 26 in the Federal Register. ​

The proposal doubles the number of technology sectors covered, from three to six, and expands the number of countries of concern sixfold, from one to six, compared with the existing program. The six covered sectors are:

  • Artificial intelligence: Deals could face notification requirements or bans.
  • Semiconductors: Transactions could be prohibited or flagged for review.
  • Quantum computing: Falls under the new framework.
  • Hypersonic systems: Investment would require notification or be banned.
  • High-performance computing: Included among dual-use technologies.
  • Biotechnology: Added despite criticism from China's government.

The proposal implements the Comprehensive Outbound Investment National Security (COINS) Act, enacted Dec. 18, 2025, as part of the defense policy bill Congress passed for fiscal year 2026.

Why Does it Matter to Me?

Treasury estimates the rule would affect approximately 150 U.S.-based investors engaging in roughly 200 potentially covered transactions per year, with combined annual compliance costs of up to $5,860,000. Treasury derived that estimate by doubling averages from PitchBook data to account for undercounting.

Treasury certifies the rule would not significantly affect small businesses, stating that the transactions involved are more likely to involve sophisticated investors managing substantial capital. Under the new framework, criminal penalties that exist in the current China-only rules would be removed, because the COINS Act includes only civil penalty language; civil penalties and the ability to compel divestment would remain.

Both Sides, Now

Secretary Scott Bessent described the proposal as strengthening the program while giving investors clarity and a chance to comment, according to a Treasury press release. Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, told the Associated Press the proposal signals that the U.S. is tracking where American capital flows and recognizes that investment can accelerate military-relevant capabilities.

Critics argue restrictions on technology investment disrupt supply chains and harm companies. In April 2018, the Commerce Department banned American companies from selling components to Chinese phone maker ZTE, forcing it to halt major operations, Reuters reported, illustrating how U.S. technology restrictions can sharply harm companies and their partners. China's Foreign Ministry spokesperson Mao Ning said China would monitor developments and take measures to safeguard its interests in response to the proposal.

What Happens Next?

The existing China-only rules under Part 850 remain in force for activity between Jan. 2, 2025, and the effective date of any final rule. Investors with a direct financial interest in a specific transaction may ask Treasury whether that deal would be prohibited under a confidential guidance process; any response would be non-binding and would not constitute approval or a waiver. No effective date for the final rule has been announced, and Treasury must first close the public comment period before it can issue one.

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