The U.S. Department of the Treasury released a Notice of Proposed Rulemaking on Thursday, signaling a major expansion of the Outbound Investment Security Program. The proposal focuses on curbing American capital that could accelerate the military modernization of nations deemed adversarial, specifically targeting investments above $50,000 in sectors such as artificial intelligence, supercomputing, biotechnology and hypersonic systems. The rule would apply to China, Russia, North Korea, Cuba, Iran and other “countries of concern,” reflecting a broader strategic shift that began with an executive order in 2023.
From executive order to congressional mandate
In 2023, President Joe Biden signed an executive order that restricted outbound U.S. investments in semiconductors, quantum computing and AI when they were destined for China. That order birthed the Outbound Investment Security Program, a framework for monitoring and, when necessary, blocking capital flows that could empower foreign militaries. Two years later, Congress codified and broadened the effort with the Comprehensive Outbound Investment National Security Act (COINS Act), enacted as part of the Fiscal Year 2026 National Defense Authorization Act in December 2025. The legislation explicitly authorized the Treasury to define “notifiable technology” and “prohibited technology” across five high-impact domains, adding a new focus on biotechnology for the first time.
Key provisions of the proposed rule
The draft regulation sets a monetary threshold of $50,000, meaning any U.S. person—or a controlled foreign entity—must either notify Treasury or refrain from investing when the transaction involves covered technologies and a covered foreign person. Exemptions include routine equity purchases, such as buying publicly-traded shares, which remain outside the scope. The rule spells out detailed technical parameters for each sector: hypersonic systems (vehicles capable of five times the speed of sound), high-performance computing and supercomputing, as well as the newly added biotechnology category. Violations could trigger civil penalties, and the Treasury will solicit public comment before finalising the language.
Compliance expectations
Industry observers warn that the rule will force firms to build more robust compliance infrastructures. Jason Chipman, a former Justice Department attorney now with WilmerHale, notes that “the new rule will require more substantial compliance programs to manage risk.” Companies will need to conduct diligent inquiries to determine whether a potential partner or target qualifies as a “covered foreign person” and whether the technology falls within the prohibited list. The Treasury’s own guidance will require submitters to provide granular information about the transaction, the technology involved, and the end-use assessment.
Political backdrop and reactions
The timing of the proposal is noteworthy. It follows a recent waiver of Russian sanctions by former President Donald Trump after a diesel-fuel agreement with President Vladimir Putin, and it arrives amid a temporary easing of U.S.–China tensions negotiated between President Trump and President Xi Jinping last year. Nonetheless, the rule underscores a consistent U.S. strategy to prevent strategic rivals from leveraging American capital for military advantage.
Experts from think tanks and law firms have weighed in. Craig Singleton of the Foundation for Defense of Democracies said the rule “sends an important signal to markets that Washington is tracking where U.S. capital is flowing and what capabilities it is helping build.” Former trade official Ryan Majerus described the proposal as “the first step in a fairly long process” that will eventually add enforcement teeth to the outbound investment regime.
China’s foreign ministry reacted sharply, urging the United States to respect market-economy principles and to stop “interfering in normal economic and trade cooperation.” Spokesperson Mao Ning warned that over-extending the notion of national security and imposing “discriminatory measures” serve no one’s interests, and pledged to monitor the development closely.
Enforcement in practice
Enforcement is already taking shape. In July, Treasury levied a $200,000 fine against a U.S.-based firm for failing to report a $92,500 investment by a subsidiary in a Chinese AI and robotics company. That case illustrates how the agency is already applying the notification requirements introduced under the 2023 order. The public comment period for the new rule is now open, and stakeholders have until the deadline listed in the official notice to submit feedback via regulations.gov.
As the United States tightens its grip on outbound capital, investors will need to navigate a more complex compliance landscape. The proposed rule, once finalized, could reshape the flow of private money into emerging technologies worldwide, reinforcing Washington’s belief that capital can accelerate military-relevant capabilities just as surely as technology transfer can. The coming weeks will reveal how industry and foreign governments adjust to the evolving regulatory environment.
