The U.S. Treasury Department wants to close the door on American money flowing to AI developers in China and other “countries of concern.” On October 22, 2026, Treasury issued a proposed rule under the Comprehensive Outbound Investment National Security (COINS) Act (the name the fact sheet uses; the press release body calls it the Comprehensive Outbound Investment Security Act) that would turn today’s partial restrictions on AI investment into a broad prohibition. It is a proposal, not a final rule, and the public has until December 7, 2026, to comment.
What Treasury proposed
The COINS Act passed as part of the Fiscal Year 2026 National Defense Authorization Act and puts the existing Outbound Investment Security Program on a statutory footing. Treasury’s press release says the law directs it to write rules that (1) require U.S. persons to notify Treasury of certain deals and (2) prohibit others outright.
For AI specifically, Treasury’s fact sheet says the proposal “expands the existing prohibition to more broadly restrict U.S. person investment into country of concern entities that develop any SI system.” That would eliminate the notification-only tier for those AI deals. In other words, many investments that today just need to be reported would simply be banned.
Note the terminology: the proposal says “super intelligence (SI) systems” instead of “AI systems.” The fact sheet explains that Executive Order 14434, issued September 29, 2026, requires agencies to use “Super Intelligence” and “SI” in place of “Artificial Intelligence” and “AI” in certain documents.
Who and what it covers
Per Treasury’s fact sheet, the proposal:
- Defines countries of concern as China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, and Venezuela under the Maduro regime. Treasury says Venezuela currently does not meet that definition because it recognized a new head of state in March 2026.
- Covers six technology areas: semiconductors and microelectronics, SI systems, quantum, high-performance computing and supercomputing, hypersonic systems, and biotechnology (which Treasury added using authority in the law).
- Targets specific deal types, including equity stakes, certain convertible debt, joint ventures, greenfield expansions, and some limited partner investments in non-U.S. funds.
- Applies a knowledge standard. Per the fact sheet, the standard covers actual knowledge, awareness of a high probability, or facts that could have been learned the facts through “a reasonable and diligent inquiry.”
What is excepted
The proposal does not ban all investment in these countries. Exceptions in the fact sheet include publicly traded securities, index funds, mutual funds and ETFs, certain LP commitments of $2 million or less, derivatives of those securities, and transactions worth $50,000 or less in aggregate over 12 months (an exception from notification only). Bank lending and payment processing are also treated as secondary or ancillary and excepted.
Treasury also says it does not plan to publish a list of covered foreign companies. Investors are expected to do their own diligence, though they can ask Treasury for non-binding feedback on a specific, real transaction.
Penalties
Violations could bring civil penalties up to the maximum available under IEEPA, which the fact sheet names as the “International Economic Emergency Powers Act (IEEPA),” and Treasury could force divestment of a prohibited deal. The proposal includes a voluntary self-disclosure process.
Why it matters
For everyday investors, little changes. If you hold a broad index fund or ETF, the proposal explicitly excepts it. The rule is aimed at venture capital, private equity, corporate investors and individuals making direct or private-fund bets.
For U.S. venture and private equity, it is a big deal. Moving AI from “notify” to “prohibit” means funds can no longer simply file paperwork for a stake in a Chinese AI developer. The “any SI system” wording, as Treasury summarizes it, is broad. How narrowly the final rule defines an SI system will decide how many deals are affected, and that is TBD until Treasury publishes final text.
Compliance shifts to the investor. With no official list of covered companies, the burden of figuring out whether a target develops AI and has ties to a country of concern falls on U.S. investors and their lawyers. Expect larger diligence costs and more conservative deal-making, especially for funds with Asian exposure.
It fits a broader pattern. Washington has steadily tightened the flow of chips, models and now capital toward China’s AI sector. This proposal treats money as a strategic input in the same way export controls treat hardware.
Timeline
- October 22, 2026: Proposed rule issued.
- December 7, 2026: Public comment deadline, via regulations.gov.
- Final rule: Date TBD. Treasury says the current regulations at 31 C.F.R. Part 850 will continue to apply to U.S. person activities that occurred on or after January 2, 2025, and before the final rule’s effective date.
The bottom line
Treasury is proposing to make U.S. backing of AI developers in China and other adversary nations largely off-limits, not just reportable. Retail investors in index funds are carved out, but anyone writing private checks into AI companies with ties to those countries should read the proposal closely and consider commenting before December 7.
Sources
- U.S. Treasury press release, “Treasury Issues Proposed Rule to Implement Comprehensive Outbound Investment National Security Act” (Oct. 22, 2026): https://home.treasury.gov/news/press-releases/sb0667/
- U.S. Treasury, Fact Sheet & FAQs, COINS Act NPRM: https://home.treasury.gov/system/files/206/Fact-Sheet-FAQs-COINS-Act-NPRM.pdf
- U.S. Treasury, COINS Act NPRM full text: https://home.treasury.gov/system/files/206/COINS-NPRM.pdf