ECONEconomy NO. ---
COINS Act proposed rule would ban US investment in China AI firms
Treasury's proposed rule under the COINS Act adds hypersonics, supercomputing and biotech to the outbound investment program, turns AI deals into an outright ban, and says Venezuela no longer qualifies. Comments are due December 7.
Key takeaways
- The US Treasury released a COINS Act proposed rule on October 22, 2026. It would rewrite the Outbound Investment Security Program that has governed some US investment in Chinese technology since January 2, 2025.
- The proposal goes beyond semiconductors, AI and quantum. It adds high-performance computing and supercomputing, hypersonic systems and, using Treasury's own authority, biotechnology.
- Investment in country-of-concern entities that develop any AI system (renamed "super intelligence" or SI systems in the draft) would move from notification to an outright ban.
- The statute names China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela "under the regime of Nicolás Maduro Moros". Treasury says Venezuela no longer meets that definition.
- Comments are due by December 7, 2026. The law requires final regulations within 450 days of its December 18, 2025 enactment, which points to around March 13, 2027.
The US Treasury released a COINS Act proposed rule on October 22, 2026, that would widen limits on American investment in Chinese technology. It adds high-performance computing, hypersonic systems and biotechnology, and would turn AI investment in country-of-concern entities from notification into an ban.
"Under President Trump's leadership, we are committed to putting America's national security first," Bessent said in the Treasury press release. Christopher Pilkerton, the assistant secretary who oversees investment security, said the rule "will enhance the Outbound Investment Security Program". Separately, the Pentagon has declared Confucius Institutes a US security threat.
What the COINS Act proposed rule covers
The current program grew out of a 2023 executive order and took effect on January 2, 2025. It covers only China, Hong Kong and Macau, and three technology areas. The COINS Act turned that program into law and broadened it. According to a client alert from Latham & Watkins, the act was signed on December 18, 2025 and sunsets after seven years unless Congress renews it.
The Treasury fact sheet sets out two kinds of obligations for "US persons", a group that includes US citizens, green-card holders, US-organised entities and their foreign branches, and anyone physically in the United States:
- Notifiable transactions are allowed but must be reported to Treasury within 30 days of completion.
- Prohibited transactions are banned unless Treasury grants a national interest exemption.
US persons would also answer for transactions by their "controlled foreign entities", meaning overseas subsidiaries. Covered deals include equity stakes, certain convertible debt, joint ventures, greenfield investments, some limited partner (LP) commitments to non-US funds, and a US person directing a foreign person's transaction.
Sector by sector: 2025 rules vs. the proposal
| Technology area | Rules in force since Jan. 2, 2025 | Proposed COINS Act rule (Oct. 22, 2026) |
|---|---|---|
| Semiconductors and microelectronics | Covered | Prohibition widened to radiation-hardened ICs, photonic ICs, high-bandwidth memory and more advanced ICs; notification kept for other IC activity |
| AI ("SI systems" in the draft) | Covered (mix of bans and notifications) | Ban on investment in entities that develop any SI system; the notification tier for these deals would disappear |
| Quantum information technologies | Covered | Ban extended to quantum computing algorithms and applications |
| High-performance computing and supercomputing | Partly, via the supercomputer ban | New statutory sector; notification added for high-bandwidth, low-latency interconnects |
| Hypersonic systems | Not covered | New bans on hypersonic systems, propulsion, materials and test facilities; notification for sensors, controls and software |
| Biotechnology | Not covered | New bans on brain-computer interfaces, biomanufacturing equipment, bioinformatics tools and automated-discovery hardware or software, among others |
Source: US Treasury fact sheet and FAQs on the COINS Act NPRM, October 22, 2026; Latham & Watkins.
The change of name for AI is not a typo. According to a footnote in the fact sheet, Executive Order 14434, signed on September 29, 2026, tells federal agencies to use "Super Intelligence" and "SI" instead of "Artificial Intelligence" and "AI" in certain documents. The draft rule uses "super intelligence systems" for the category the current regulations call "AI systems".
Which countries are in scope, and the Venezuela question
The COINS Act and the draft rule define the countries of concern as China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela "under the regime of Nicolás Maduro Moros". The 2025 rules covered only China.
Reports that Venezuela had been "dropped" are accurate in effect, but the legal wording is narrower. In its FAQ, Treasury says the Maduro regime "no longer exists". It adds that the United States recognised Delcy Rodríguez as head of state on March 5, 2026, so Venezuela "does not meet the NPRM's definition of a country of concern." Treasury also warns that the rule could still reach some investments in Venezuelan entities, because it can apply to certain deals outside a country of concern. Reuters reported the same position and noted that Treasury gave no further detail.
What changes for US investors and funds
The proposal would affect venture capital, private equity and corporate deal teams most. Large parts of ordinary portfolio investing stay outside its scope. The fact sheet lists these exceptions:
- Publicly traded securities on any exchange or over-the-counter market, plus securities of investment companies such as index funds, mutual funds and ETFs.
- LP commitments to non-US pooled funds of up to $2 million, or those covered by a binding contractual assurance.
- Derivatives of those excepted securities.
- New in the COINS Act proposal: a de minimis exception for transactions of no more than $50,000 in total over 12 months (for notification only), plus exceptions for bank lending, payment processing, underwriting and other ancillary financial services.
- Full buyouts of a covered foreign person's stake, some intracompany transfers, binding capital commitments made before the final rule takes effect, and transactions completed before December 18, 2025.
Some exceptions would not apply where an investor gains governance rights beyond standard minority protections. The rule would also set a knowledge standard. An investor could be treated as "knowing" a fact it would have found through a "reasonable and diligent inquiry", so due diligence on Chinese targets becomes central to compliance.
The fact sheet says Treasury does not plan to publish a list of covered foreign persons. Instead, the draft offers two things: non-binding feedback for parties to real (not hypothetical) transactions, and a channel for anyone to submit confidential information about whether a foreign company is covered. According to Treasury, violators would face civil penalties up to the maximum allowed under the International Emergency Economic Powers Act, and the Treasury Secretary could order divestment of prohibited deals. Latham put the current inflation-adjusted cap at $377,700 or twice the transaction value.
Reuters also reported that the rules leave out licensing deals between US drugmakers and Chinese companies, which the pharmaceutical industry had pushed for. The fact sheet says contractual arrangements are excepted, other than those involving technology transfer or the transfer of technical knowledge.
Timeline: comment period and the March 2027 deadline
| Date | Milestone |
|---|---|
| Jan. 2, 2025 | Current outbound rules (31 C.F.R. Part 850) take effect |
| Dec. 18, 2025 | COINS Act enacted in the FY2026 NDAA |
| Oct. 22, 2026 | Treasury publishes the proposed rule |
| Dec. 7, 2026 | Public comment period closes (regulations.gov) |
| Around Mar. 13, 2027 | End of the 450-day statutory window for final regulations |
Sources: Treasury fact sheet; Treasury outbound investment program page; Latham & Watkins. The March 13 date is calculated as 450 days after enactment.
The proposal does not change anything yet. According to Treasury, the existing Part 850 rules keep applying until the final rule sets its own effective date.
What it means
For most retail investors holding Chinese stocks or ETFs, the proposal changes little, because listed securities and fund shares remain excepted. The bigger effect is on private capital. Venture and growth investors, corporate venture arms and LPs with larger commitments to China-focused funds would face a blanket ban on backing companies that build AI models in countries of concern. They would also face new limits in biotech and hypersonics.
The timing matters for markets already watching US-China technology policy. This week Bullquill covered the FCC's move against devices with Chinese surveillance chips, DeepSeek's $15 billion funding round and the slump in chip stocks. Reuters noted that the proposal follows a state visit to Washington by Chinese President Xi Jinping last month and suggests continued pressure on Beijing's technology ambitions. Background on the mainland market is in our CSI 300 explainer.
Several points remain open:
- Exactly how the new biotechnology and hypersonics definitions would be drawn.
- Whether the broad SI ban will be narrowed after comments.
- Which "third country" partners might qualify for exceptions.
- Whether the final rule will arrive before the March 2027 deadline.
Treasury has not said when it will finalise the text.
Frequently asked questions
What is the COINS Act?
The Comprehensive Outbound Investment National Security Act, enacted on December 18, 2025 in the FY2026 National Defense Authorization Act, puts the US outbound investment program into law and lets Treasury require notification of, or prohibit, certain US investments in sensitive technologies in countries of concern.
Which countries are covered by the proposed outbound investment rule?
The law and the draft rule list China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime. Treasury says Venezuela no longer meets that definition because the Maduro regime no longer exists.
Can Americans still buy Chinese stocks or ETFs under the new rule?
The proposal excepts publicly traded securities and securities of investment companies such as index funds, mutual funds and ETFs, so ordinary listed holdings are generally outside its scope. Other US laws and sanctions may still apply.
When is the comment deadline for the COINS Act proposed rule?
Treasury is accepting public comments through regulations.gov until December 7, 2026. The final rule will set its own effective date; the statute calls for regulations within 450 days of enactment, around March 13, 2027.
Sources
- US Treasury: Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act (Oct. 22, 2026)
- US Treasury: Fact Sheet and FAQs on the COINS Act NPRM
- US Treasury: Proposed Regulations to Implement Subtitle C of the COINS Act (NPRM text)
- US Treasury: Outbound Investment Security Program
- Reuters (via Investing.com): US Treasury drops Venezuela from countries facing outbound US investment restrictions
- Latham & Watkins: Congress Enacts Changes to Outbound Investment Security Program
This article is for information only and is not investment advice.
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