Treasury proposes barring U.S. investment in Chinese ‘super intelligence’ and biotech firms under new outbound rules

By Calvin Strand

WASHINGTON — The Treasury Department has proposed rules that would bar U.S. investors from backing companies in China and five other countries of concern that develop any “super intelligence” system, and would add biotechnology and hypersonic weapons to the list of technologies in which American money is restricted, according to a 137-page notice of proposed rulemaking scheduled for publication in the Federal Register on Monday.

The proposal implements the Comprehensive Outbound Investment National Security Act, or COINS Act, which Congress passed as part of the fiscal 2026 National Defense Authorization Act, Treasury said Oct. 22. It would replace the outbound investment program the department has run since Jan. 2, 2025, under a Biden-era executive order with a new set of regulations, 31 CFR Part 851, grounded in statute. Comments are due Dec. 7, according to the Federal Register filing.

The administration presents the rule as both a security measure and a clarity measure for investors. “Under President Trump’s leadership, we are committed to putting America’s national security first,” Treasury Secretary Scott Bessent said in the 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. This important step also helps promote our commitment to an open investment environment by providing clarity to U.S. and foreign investors as well as an opportunity for them to provide feedback on the proposed regulations.”

“The proposed regulations are designed to address risks that can arise when foreign adversaries try to benefit from U.S. investment in key technology sectors,” said Christopher Pilkerton, Treasury’s assistant secretary for investment security, according to the same release.

The Inquisitor reviewed the full proposal. Below are its main changes, the department’s own cost estimates and the dates that matter for investors and their lawyers.

What changes

The current program, set out in 31 CFR Part 850, covers only China, including Hong Kong and Macau, and three technology areas: semiconductors and microelectronics, quantum information technologies and artificial intelligence, the proposal says. The COINS Act extends the list of countries of concern to Cuba, Iran, North Korea, Russia and “the Bolivarian Republic of Venezuela under the regime of Nicolás Maduro Moros,” and adds two technology sectors: high-performance computing and supercomputing, and hypersonic systems.

Artificial intelligence becomes a flat prohibition

The most consequential change concerns what the old rules called AI systems. The proposal renames them “super intelligence (SI) systems,” citing Executive Order 14434, “Inaugurating the Era of Super Intelligence,” which the notice says was issued Sept. 29 and requires agencies to use “Super Intelligence” and “SI” in place of “Artificial Intelligence” and “AI” in certain documents.

Under the current rules, whether an AI investment was banned, had to be reported or was outside the program depended on how much computing power was used to train the model and on its designed or intended uses. Treasury now says that approach no longer works. “Over the past two years, SI models have achieved notable performance gains through additional means other than the quantity of training compute. Therefore, no single measure, benchmark, or threshold is currently sufficient to distinguish advanced models,” the notice says, pointing to synthetic data, algorithmic efficiencies, post-training techniques and inference-time compute.

The department also says general-purpose models can show national security functions they were not designed for, and that open-source models “that have fewer safeguards and oversight” can be incorporated into systems outside their intended scope. The Secretary, “in consultation with interagency partners and the Executive Office of the President,” therefore determined it was necessary “to define prohibited technology to include the development of any SI system,” according to the filing.

Treasury argues the change is simpler for investors, because it “does not rely on a U.S. person ascertaining the technical capabilities or thresholds of SI systems being developed by a covered foreign person.” It says it “particularly welcomes feedback” on the broad prohibition and notes that investors who believe a deal is in the national interest can seek an exemption under proposed § 851.502.

Biotechnology and hypersonics

Using authority in the statute to add sectors, the Secretary added biotechnology to the prohibited list after determining that the sector “in countries of concern enables the military, intelligence, surveillance, or cyber-enabled capabilities of those countries,” the notice says. The department cites risks including “the proliferation of biological weapons, the development of brain-computer interfaces, harm to U.S. supply chain security” and the indigenization of advanced technologies with military and surveillance end uses.

The proposed biotechnology prohibition covers the development, engineering or use of a biological system to modify, enhance, produce or control five categories, the filing says:

For hypersonics, prohibited technology would include developing or producing a hypersonic system, its propulsion (including ramjets, scramjets and combined-cycle engines), fuels and propellants, specialized materials such as ultra-high-temperature ceramics and stealth coatings, testing facilities, and “digital twin” modeling software for such systems, according to the proposal.

The supercomputing prohibition carries over the current threshold: supercomputers able to deliver 100 or more double-precision petaflops, or 200 or more single-precision petaflops, within a 41,600-cubic-foot envelope. In semiconductors, the proposal would add high-bandwidth memory with a bandwidth density above 2 gigabytes per second per square millimeter, which Treasury says aligns the program with export control classification ECCN 3A090.

A note on Venezuela

The statute lists Venezuela only “under the regime of Nicolás Maduro Moros,” and Treasury’s proposal addresses that directly. “That regime no longer exists,” the notice says. “On March 5, 2026, the United States recognized Delcy Rodríguez as the head of state of Venezuela and her government is not the regime of Nicolás Maduro Moros.” The proposed regulatory text nonetheless keeps the statutory wording in the country-of-concern definition.

Exceptions and penalties

The proposal keeps exceptions for publicly traded securities, index and mutual funds, and limited partner stakes of $2 million or less with contractual assurances, and adds a statutory carve-out for underwriting, bank lending, payment processing, prime brokerage and global custody, according to the filing. A new de minimis exception would exempt deals totaling no more than $50,000 with a given covered foreign person over 12 months from the notification requirement, with Treasury noting it “would not be bound by the U.S. person’s determination of the value of a transaction.”

Because the COINS Act includes civil but not criminal penalty language, Treasury proposes to drop the criminal penalty provisions of the current rules and keep civil penalties up to the maximum allowed under the International Emergency Economic Powers Act. The Secretary could also compel divestment of a prohibited transaction, the notice says.

What Treasury expects it to cost

Treasury’s regulatory analysis is based on PitchBook data from roughly 2023 through 2025 showing almost 230 U.S. investors completing about 300 deals in the covered sectors in countries of concern. The department doubled the annual averages to guard against undercounting, assuming about 150 investors and 200 transactions a year, according to the filing.

The Paperwork Reduction Act section of the notice gives a slightly different figure, estimating 18,000 burden hours a year from 150 respondents at a cost of $2.31 million to $5.27 million.

Key dates

The proposal would not apply retroactively; the current rules continue to govern deals made between Jan. 2, 2025, and the effective date of the final regulations, which Treasury says will be set in a later final rule. Comments can be filed at regulations.gov under docket TREAS-DO-2026-0595. Treasury’s program page has the notice and a fact sheet.

The Inquisitor is seeking comment from the House Select Committee on the Chinese Communist Party and the National Venture Capital Association. The Treasury Department and the Republican and Democratic staffs of the House Financial Services Committee were already contacted by the Inquisitor today on other matters. The U.S.-China Business Council does not list a public press email address on its website. This story will be updated with any response.