The U.S. Treasury Department on Thursday proposed a rule that would ban American investment in any company developing AI systems in China, Russia and other countries of concern. The Notice of Proposed Rulemaking implements the Comprehensive Outbound Investment National Security Act, known as the COINS Act, which Congress passed as part of the fiscal 2026 National Defense Authorization Act and which was enacted on December 18, 2025.
“Under President Trump's leadership, we are committed to putting America's national security first.”— Scott Bessent, Treasury Secretary
The AI change is the sharpest in the package. Under the current Outbound Investment Security Program, some AI deals are prohibited and others only have to be reported. Treasury's proposal expands the prohibition to cover investment in country-of-concern entities that develop any AI system, and it would eliminate the existing notification requirement for those transactions.
The rule does not use the term AI. Following Executive Order 14434, signed on September 29, 2026, which requires agencies to say "Super Intelligence" in place of "Artificial Intelligence" in certain documents, the proposal refers to "super intelligence systems," or SI systems, where earlier regulations said AI systems.
Key facts
- 01Treasury issued a proposed rule on October 22, 2026 implementing the COINS Act, part of the FY2026 defense bill.
- 02US persons would be barred from investing in country-of-concern entities that develop any AI system, replacing a notice requirement.
- 03Countries of concern are China (with Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela under Maduro.
- 04Hypersonics and biotechnology join semiconductors, AI, quantum and supercomputing as covered sectors.
- 05Public comments are due December 7, 2026; a final rule will set the effective date.
The COINS Act sets five sectors: semiconductors and microelectronics, AI systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. Treasury used its authority to add a sixth, biotechnology, covering areas such as brain-computer interfaces, biomanufacturing equipment, bioinformatics tools and hardware or software for automated scientific discovery.
Other sectors also widen. The semiconductor prohibitions would extend to radiation-hardened chips, photonic integrated circuits and high-bandwidth memory. The quantum ban would reach quantum computing algorithms and applications, and high-bandwidth, low-latency interconnects used in supercomputing would become notifiable.
The countries of concern are China, including Hong Kong and Macau, plus Cuba, Iran, North Korea, Russia and Venezuela under the Nicolás Maduro regime. Treasury's FAQ notes that the Maduro regime no longer exists and that the U.S. recognized Delcy Rodríguez as Venezuela's head of state on March 5, 2026, so Venezuela does not currently meet the proposed definition.
Ordinary portfolio investing is largely exempt. Publicly traded securities, index funds, mutual funds and ETFs are excepted, as are limited-partner stakes of no more than $2 million in committed capital. Deals of $50,000 or less in aggregate over 12 months are exempt from the notification requirement only. Notifiable deals must be reported within 30 days of closing.
Treasury will not screen deals itself. Each U.S. investor has to decide whether a transaction is prohibited, notifiable or out of scope. Violations can draw civil penalties up to the maximum allowed under the International Emergency Economic Powers Act, and Treasury can order divestment of prohibited deals. The department has already brought its first civil penalty under the existing program: $200,000 against Amidi, LLC, for failing to report a roughly $92,500 investment by its Chinese subsidiary in an AI and robotics company.
Jason Chipman, a partner at WilmerHale, said the changes will require investors to build more substantial compliance programs to manage risk. Christopher Pilkerton, Treasury's Assistant Secretary for Investment Security, said the regulations target risks that arise when foreign adversaries try to benefit from U.S. investment in key technology sectors.
“It's just the first step in a fairly long process”— Ryan Majerus, Partner at King & Spalding and former U.S. trade official
Treasury is taking public comments through regulations.gov until December 7, 2026. A final rule, which will set the effective date, will follow.
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