What's Happening?
On October 22, 2026, the U.S. Department of Treasury issued a Notice of Proposed Rulemaking (NPRM) to implement the Comprehensive Outbound Investment National Security (COINS) Act, which was enacted as part of the FY 2026 National Defense Authorization
Act (NDAA). This proposed rule significantly expands the scope of the existing Outbound Investment Security Program (OISP). Key changes include a new blanket prohibition on U.S. investments in foreign entities developing any Artificial Intelligence (AI) systems, regardless of compute or end-use thresholds. Previously, AI investments were largely notifiable rather than prohibited. Additionally, a new biotechnology sector is introduced with prohibited technologies such as certain export-controlled agents, energetic materials, novel functional materials, pharmaceutical compounds, brain-computer interfaces, and biomanufacturing equipment. The NPRM also broadens restrictions in semiconductor and quantum computing sectors, expands the definition of 'develop' and 'knowledge' standards, and adds Cuba, Iran, North Korea, and Russia to the list of 'countries of concern.' The definition of 'covered foreign persons' is also expanded to include entities subject to the direction or control of covered persons, even if they don't meet the 50% ownership threshold.
Why It's Important?
This proposed rule represents a substantial tightening of U.S. outbound investment controls, aiming to prevent American capital and expertise from contributing to the technological advancement of strategic adversaries in critical sectors. The blanket prohibition on AI development investments reflects growing concerns about the rapid evolution of AI capabilities and the difficulty in isolating specific end-uses, indicating a more aggressive stance on national security. The inclusion of a broad biotechnology sector highlights the U.S. government's recognition of biotechnology as a dual-use technology with significant military and intelligence implications. These expanded restrictions will significantly increase the due diligence burden on U.S. investors, fund managers, and companies with controlled foreign entities, as they will need to meticulously vet potential investments against a wider array of prohibited technologies and countries. While new exceptions like a $50,000 de minimis threshold and a non-binding feedback process are introduced, the overall impact is a more restrictive investment landscape designed to safeguard U.S. technological superiority and national security interests.
What's Next?
Comments on the Notice of Proposed Rulemaking (NPRM) are due by December 7, 2026. During this period, stakeholders, including U.S. investors, technology companies, and legal experts, will have the opportunity to provide feedback to the Treasury Department, potentially influencing the final rule. The current OISP regulations will remain in effect until the final rule is implemented. In the interim, U.S. companies and investors are advised to begin reviewing their existing portfolios, deal pipelines, and due diligence practices against the proposed expanded scope to ensure future compliance. This proactive review will be crucial for identifying potential prohibited transactions and adjusting investment strategies accordingly. The Treasury Department will then review the comments and issue a final rule, which is expected to further solidify the U.S. government's strategy to control the flow of capital and technology to countries of concern in sensitive sectors like AI and biotechnology.
Beyond the Headlines
The proposed rule signifies a deeper strategic shift in U.S. economic statecraft, moving beyond traditional export controls to actively manage outbound capital flows. This approach reflects a recognition that financial investments can indirectly transfer critical technological capabilities and intellectual property, posing national security risks. The broad prohibition on AI development, irrespective of specific applications, suggests a preemptive strategy to curb the foundational growth of AI capabilities in adversarial nations, indicating a long-term view on technological competition. Furthermore, the expansion of 'countries of concern' and the broadened definitions of 'develop' and 'knowledge' could lead to increased complexity and potential extraterritorial implications for U.S. entities operating globally. This regulatory framework could also set a precedent for other nations to adopt similar measures, potentially leading to a more fragmented global investment landscape in critical technology sectors and accelerating the decoupling of certain technological ecosystems.
