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Treasury Proposes Broader U.S. Investment Ban on Chinese AI Firms
The Treasury Department proposed expanding U.S. restrictions on investments in Chinese technology companies under the 2026 COINS Act. The draft would prohibit covered U.S. investments in certain firms developing AI systems and add new rules
AI.info Team · Written with AI · fact-checked ·
The Treasury Department proposed on October 22 a broader set of restrictions on U.S. investments in companies tied to China and other countries of concern, including a prohibition covering investments in certain firms developing artificial intelligence systems. The proposal implements the 2025 Comprehensive Outbound Investment National Security Act, or COINS Act, and would expand an existing program that restricts or requires reporting of some U.S. investments abroad.
The draft is not yet in force. Treasury opened a public comment period ending December 7, 2026, and says a later final rule will set the program’s effective date. The proposal covers more than AI: it also adds rules for high-performance computing, hypersonic systems and biotechnology, while revising restrictions involving semiconductors and quantum technology.
AI investment would face a broader prohibition
Treasury proposes to prohibit covered U.S. investments in covered foreign persons engaged in developing any “super intelligence system,” the term the proposed rule uses in place of “AI system.” The department’s fact sheet says the change would broaden the existing prohibition and eliminate the current notification requirement for those transactions. The scope therefore turns on the proposed definitions of a covered transaction, a covered foreign person and the technology involved—not simply on whether an investment is connected to China.
The proposal applies to U.S. persons, including U.S. citizens, lawful permanent residents, U.S.-organized entities and people in the United States. It would also impose certain obligations related to their controlled foreign entities. Covered transactions include equity investments, some convertible or rights-bearing debt, joint ventures, greenfield investments, certain directions of foreign transactions and some limited-partner investments in pooled funds.
Treasury’s proposed knowledge standard could also shape which transactions fall under the rules. The fact sheet says a person may be assessed as having knowledge through actual awareness, awareness of a high probability, or information that could have been obtained through a reasonable and diligent inquiry.
The proposal reaches beyond China and AI
The COINS Act names China, including Hong Kong and Macau, as well as Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime as countries of concern. The proposed framework divides covered technologies into six areas: semiconductor technology and microelectronics; super intelligence systems; quantum information technologies; high-performance computing and supercomputing; hypersonic systems; and biotechnology.
In semiconductors, Treasury proposes to retain existing prohibitions on certain advanced chip design and fabrication activities while adding categories such as radiation-hardened and photonic integrated circuits, high-bandwidth memory and additional advanced chips. For quantum technology, the draft would add prohibitions on investment in the development of quantum-computing algorithms or applications. It also proposes new prohibitions and notification requirements for specified hypersonic technologies and biotechnology activities, including some biomanufacturing, bioinformatics and automated scientific experimentation.
The department says it added biotechnology under authority granted by the COINS Act. That law allows Treasury to define technical parameters for specified sectors and, through notice-and-comment rulemaking, add other technology areas connected to a country of concern’s military, intelligence, surveillance or cyber-enabled capabilities.
Exceptions leave room for some investments
The proposal does not bar all U.S. investment connected to countries of concern. Treasury lists exceptions for investments in publicly traded securities and investment-company securities, certain intracompany transfers, some bank and underwriting services, and specified limited-partner commitments. A limited-partner investment may also qualify for an exception if committed capital does not exceed $2 million or if it carries a specific binding contractual assurance.
A separate $50,000 de minimis exception applies only to the notification requirement, measured across a U.S. person’s transactions during the preceding 12 months. Treasury also proposes a process for eligible parties with a direct financial interest in an actual transaction to seek non-binding feedback on whether it would be prohibited, as well as a national-interest exemption process.
Comments will shape the final rule
“The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security,” Treasury Secretary Scott Bessent said in the department’s announcement.
“The proposed regulations would strengthen the existing Outbound Investment Security Program to prevent our adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security.”
Scott Bessent, Secretary of the Treasury
The proposal builds on the Outbound Investment Security Program, whose existing rules took effect January 2, 2025. Treasury says the public may comment on the full draft through December 7; the department will consider that feedback before issuing final regulations. Until then, the new restrictions remain proposed, not operative.