US Treasury widens outbound investment curbs to biotech and four more countries

US Treasury widens outbound investment curbs to biotech and four more countries

22 October 2026: The US Treasury has proposed the rules that turn the Comprehensive Outbound Investment National Security (COINS) Act into a working programme: US persons would be barred from investing in companies tied to China, Cuba, Iran, North Korea or Russia that develop any advanced AI system, and would have to notify Treasury of a wider set of deals in chips, high-performance computing, hypersonics and biotechnology. Comments are open until 7 December 2026, and nothing takes effect until a final rule sets a date.

From an executive order to a statute

Treasury's current Outbound Investment Security Program rests on a 2023 executive order and on regulations at 31 C.F.R. Part 850, in force since 2 January 2025, which name only China, including Hong Kong and Macau, as a country of concern. Congress put the programme on a statutory footing in December 2025, when the COINS Act passed as Subtitle C of the National Defense Authorization Act for fiscal 2026. The notice of proposed rulemaking issued on 22 October is Treasury's draft of how it will use that law.

The law itself names five sectors: semiconductors and microelectronics, AI systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. It lets the Treasury Secretary add more, and he has added biotechnology. Secretary Scott Bessent said the proposal would "prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security".

What changes for software and AI investors

The largest change for software is in AI. Today's rules prohibit some AI investments and only require notice of others. Under the proposal, any investment in a covered foreign company that develops what the rule calls a "super intelligence system" would be prohibited, and the notification route for those deals disappears. The new term replaces "AI system" throughout, following an executive order of 29 September 2026 that told agencies to use it.

Other changes that reach software and data businesses:

• Quantum: the ban extends from quantum computers and components to the development of algorithms or applications for quantum computing.
• Chips: the existing ban on certain electronic design automation software and advanced chip design stays, and widens to radiation-hardened and photonic chips and high-bandwidth memory.
• Computing: a new notification requirement covers high-bandwidth, low-latency interconnects.
• Biotechnology: the new ban includes bioinformatics tools and hardware or software for automated scientific discovery or experimentation.

The fact sheet lists five new countries of concern: Cuba, Iran, North Korea, Russia and "the Maduro regime of Venezuela". It then explains that Venezuela no longer meets the definition, because the United States recognised a new head of state on 5 March 2026, while warning investors that the rule could still reach some investments there.

Exceptions, notices and penalties

The proposal keeps exceptions for publicly traded securities, index and mutual funds, and limited partner stakes of up to 2 million dollars in non-US funds. It adds new ones for deals of 50,000 dollars or less, underwriting and bank lending. An exception falls away where the investor gets governance rights beyond standard minority protections.

A notifiable deal would have to be reported within 30 days of completion, or within 30 days of the investor learning that a completed deal was covered. Investors with a direct stake in a real transaction could ask Treasury for non-binding feedback, and anyone could submit confidential evidence that a foreign company is covered. Violations would carry civil penalties up to the maximum under the International Emergency Economic Powers Act, and Treasury could order a prohibited investment to be divested.

Funds and corporate venture arms with portfolios in Asia have until 7 December to comment through regulations.gov. Treasury says the final rule will be issued at a later date and will set the effective date; until then the Part 850 rules in force since January 2025 continue to apply.

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• Drylab AI raises $3m seed from Vertex to put AI agents in pharma labs
• Should you raise money at all? The costs, and the alternatives

Sources

• US Treasury: Treasury Issues Proposed Regulations to Implement the COINS Act (press release sb0667), 22 October 2026
• US Treasury: Fact Sheet and FAQs, COINS Act NPRM, 22 October 2026
• US Treasury: Outbound Investment Security Program (read 2026-10-24), 24 October 2026
• The Korea Herald (Yonhap): US Treasury proposes rules to restrict investments in adversaries, 24 October 2026