U.S. Treasury Proposes Expanded Outbound Investment Security Regulations Under COINS Act
What's Happening?
On October 22, 2026, the U.S. Department of the Treasury issued a Notice of Proposed Rulemaking (NPRM) to implement the outbound investment provisions of the Comprehensive Outbound Investment National
Security Act of 2025 (COINS Act). This NPRM aims to establish a new regulatory framework under 31 C.F.R. Part 851, replacing the existing outbound investment security program (OISP) regulations. The proposed rules expand the list of 'countries of concern' beyond China (including Hong Kong and Macau) to include Cuba, Iran, North Korea, Russia, and Venezuela (under the former Maduro regime). Additionally, the NPRM broadens the scope of covered technologies to include 'high-performance computing and supercomputing' (including AI data center clusters) and 'hypersonic systems.' It also proposes adding 'biotechnology' to the list of prohibited technologies, specifically targeting applications that could enhance the military, intelligence, surveillance, or cyber capabilities of countries of concern. The NPRM also introduces more extensive reporting obligations for notifiable transactions and clarifies the knowledge standard for U.S. persons undertaking such investments.
Why It's Important?
This proposed expansion of outbound investment security regulations signifies a significant tightening of U.S. controls over investments in critical technologies and sectors in countries deemed national security risks. For U.S. businesses and investors, these changes will necessitate a comprehensive review of their investment strategies, due diligence processes, and compliance procedures. The broader definitions of covered technologies, particularly in biotechnology and AI, mean that a wider range of commercial activities could fall under prohibition or notification requirements, potentially impacting innovation and global collaboration in these fields. The expanded list of 'countries of concern' increases the geographical scope of restrictions, requiring investors to conduct more rigorous screening of potential foreign counterparties and their affiliates. Non-compliance could lead to severe penalties, including divestment orders and monetary fines, underscoring the critical need for robust internal controls and expert legal counsel.
What's Next?
The public comment period for the NPRM is open until December 7, 2026, providing an opportunity for affected stakeholders to seek clarification or raise industry-specific concerns. Following this period, the Treasury Department will review comments and potentially revise the proposed rules before finalization. Once finalized, the new regulations will replace the existing OISP framework, requiring U.S. persons to immediately adapt their investment practices. Companies should proactively assess how these changes will impact their current and future investment portfolios, particularly those with exposure to the newly designated countries of concern or the expanded technology sectors. This will involve updating internal compliance programs, enhancing due diligence protocols, and potentially restructuring existing investments to ensure adherence to the new prohibitions and notification requirements. The Treasury's first OISP enforcement action highlights the seriousness with which these regulations will be enforced.
Beyond the Headlines
The proposed regulations reflect a broader U.S. strategy to safeguard national security by preventing adversaries from leveraging U.S. capital and technological expertise to advance their military and intelligence capabilities. This move could accelerate the decoupling of certain technology sectors between the U.S. and countries of concern, leading to the formation of distinct technological ecosystems. The inclusion of biotechnology as a prohibited sector highlights the growing recognition of its dual-use potential and its critical role in future geopolitical competition. Ethically, these regulations raise questions about the balance between national security interests and the free flow of capital and scientific collaboration. Legally, the expansive definitions and increased reporting requirements could lead to complex interpretations and potential legal challenges. Culturally, it could foster a more insular approach to technological development, potentially slowing global innovation in critical areas if international collaboration is curtailed.