What's Happening?
On October 22, 2026, the U.S. Department of the Treasury released a Proposed Rule to implement the Comprehensive Outbound Investment National Security Act of 2025 (COINS Act). This Proposed Rule aims to strengthen the existing Outbound Investment Security Program
by expanding its technological and geographic scope. Secretary of the Treasury Scott Bessent stated that the rule seeks to prevent adversaries from using U.S. investment to develop critical technologies that threaten national security. The most significant changes include expanding the prohibition on investments in artificial intelligence (AI) systems, eliminating the notification category for AI, and adding biotechnology as a prohibited sector, even though the COINS Act did not explicitly name it. The Proposed Rule also adds Cuba, Iran, North Korea, and Russia as 'countries of concern' alongside China (including Hong Kong and Macau). Comments on the Proposed Rule are due by December 7, 2026, while the Existing Rule remains in effect.
Why It's Important?
This Proposed Rule represents a significant escalation in U.S. efforts to control the flow of capital and expertise to foreign entities deemed national security risks. By broadening the scope to include all covered investments in AI and adding biotechnology as a prohibited sector, the Treasury is signaling a more aggressive stance on safeguarding critical technologies. This could have profound impacts on U.S. investors and multinational companies, particularly those with operations or investments in China and other designated 'countries of concern.' The elimination of the notification category for AI means that many investments previously requiring only reporting will now be outright prohibited, increasing compliance burdens and potential penalties for U.S. persons. The inclusion of biotechnology, a sector with dual-use potential, highlights concerns about its application in military or surveillance contexts, potentially affecting global scientific collaboration and innovation in these fields.
What's Next?
The period until December 7, 2026, will be crucial for stakeholders to submit comments on the Proposed Rule, influencing its final form. Multinational companies and investors are advised to undertake planning to assess the potential impact on their activities, as the Existing Rule remains in effect until a final rule is implemented. The Treasury will continue to enforce the Outbound Investment Security Program, as evidenced by a recent penalty against a U.S. investor for failing to file a required notification. The Proposed Rule also outlines a process for requesting nonbinding feedback from Treasury regarding potential transactions and a national interest exemption. The expansion of 'countries of concern' and the broadened definition of 'covered foreign persons' will necessitate increased due diligence for U.S. investors to ensure compliance and avoid civil penalties, which can be substantial.
Beyond the Headlines
The Proposed Rule's expansion into biotechnology raises complex ethical and economic questions. While aimed at national security, broad prohibitions could inadvertently stifle legitimate scientific research and development, particularly in areas with global health implications. The move also reflects a deeper geopolitical strategy to decouple critical technology supply chains and limit the technological advancement of rival nations. The shift from a notification-based system to outright prohibition for certain AI investments suggests a growing concern about the rapid pace of AI development and its potential for misuse. This policy could lead to a more fragmented global technology landscape, where innovation is increasingly siloed along geopolitical lines, potentially impacting the universal benefits of scientific progress and fostering a more competitive, rather than collaborative, international environment.
