Treasury

2026-10-24 politics

Washington, Friday, 23 October 2026.
No Intro Provided

Proposed Rule Issued Under Trump Administration

On October 22, 2026, the U.S. Department of the Treasury, led by Secretary Scott Bessent under President Donald Trump’s administration, issued a Notice of Proposed Rulemaking (NPRM) to implement the Comprehensive Outbound Investment National Security (COINS) Act [2]. The proposed rule expands the existing Outbound Investment Security Program (OISP) to include additional technologies and countries of concern, marking a significant regulatory milestone under the Trump administration’s ‘America First Investment Policy’ [2][4]. Treasury Secretary Bessent stated the rule aims to prevent adversaries from leveraging U.S. investments to develop critical technologies that threaten national security [2].

Legislative and Executive Foundations

The COINS Act was enacted on December 18, 2025, as part of the Fiscal Year 2026 National Defense Authorization Act (NDAA), codifying and expanding restrictions initially introduced under President Joe Biden’s 2023 executive order [1][5]. The 2023 executive order restricted outbound U.S. investments in semiconductors, quantum computing, and artificial intelligence in China, laying the groundwork for the Treasury’s Outbound Investment Security Program [1][8]. The COINS Act authorized the Treasury to prohibit or require notification for investments in dual-use strategic technologies, including semiconductor technology, microelectronics, super intelligence (SI) systems, quantum information technologies, high-performance computing, supercomputing, hypersonic systems, and biotechnology [2][5][10].

Key Provisions and Targeted Technologies

The proposed rule targets investments exceeding $50,000 in designated countries of concern, including China, Russia, North Korea, Cuba, Iran, and Venezuela [1][2][5]. It also includes Hong Kong and Macau in the definition of China for regulatory purposes [5]. The rule prohibits investments in technologies deemed critical to military modernization, surveillance, or human rights abuses, with exceptions for de minimis transactions under $50,000, underwriting services, and bank lending [5][10]. Biotechnology, a newly added sector, will be subject to restrictions on investments supporting military, intelligence, surveillance, or cyber-enabled capabilities [5][10].

Stakeholder Reactions and Industry Impact

The proposed rule has elicited mixed reactions from stakeholders. Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, emphasized that the rule sends a strong signal to markets about U.S. oversight of capital flows to adversarial nations [1][8]. He noted that capital investments can accelerate military-relevant capabilities as effectively as technology transfers [1][8]. Jason Chipman, a former Justice Department lawyer and partner at WilmerHale, highlighted the need for robust compliance programs to manage risk under the new regulations [1]. Ryan Majerus, a former U.S. trade official and partner at King & Spalding, described the proposal as a ‘first step’ in a lengthy process to enforce stricter outbound investment controls [1][8].

First Enforcement Action and Compliance Deadlines

On October 7, 2026, the Treasury issued its first civil penalty under the OISP, fining Amidi LLC $200,000 for failing to report a $92,478 investment by its Chinese subsidiary in Shanghai Qiongche Intelligent Technology Co., a company developing AI, robotics, and embodied intelligence [6]. This enforcement action underscores the Treasury’s commitment to monitoring and penalizing non-compliant transactions [6]. The NPRM’s public comment period concluded on December 7, 2026, with final regulations expected to take effect pending further review [3][5]. The COINS Act authorizes civil penalties up to the maximum amount set by the International Emergency Economic Powers Act (IEEPA), alongside provisions for mandatory divestment and voluntary self-disclosures [5][6].

Geopolitical Context and Ongoing Tensions

The proposed rule coincides with an ongoing economic and technological rivalry between the U.S. and China, which has included tariffs, restrictions on sensitive technology, and controls on critical products and rare earth minerals [8]. In September 2026, the U.S. and China extended a temporary economic truce, with the current truce set to expire in January 2027 [1][8]. Chinese Foreign Ministry spokesperson Mao Ning criticized the proposed rule, arguing that it overstretches the concept of national security and serves no one’s interests by restricting trade and investment activities [1]. Despite diplomatic tensions, the Treasury’s enforcement actions and proposed regulations reflect a broader U.S. strategy to safeguard technological leadership and national security.

Biotechnology Sector Under Scrutiny

The inclusion of biotechnology in the proposed rule reflects growing concerns about the dual-use potential of biological systems in pharmaceuticals and other applications [10]. MassBio, the Massachusetts biotechnology industry association, is reviewing the proposal to ensure it protects national security without harming U.S. drug development or patient access to medicines [10]. Kendalle Burlin O’Connell, CEO and president of MassBio, emphasized the importance of preserving international partnerships and licensing agreements to advance U.S. drug development while maintaining competitive advantage [10]. The biotechnology industry is particularly concerned about the potential impact of restrictions on innovation and global collaboration [10].

Future Enforcement and Regulatory Timeline

The Treasury plans to issue final implementing regulations after reviewing public comments, with an expected effective date to be determined [2][3][5]. The COINS Act expands the OISP’s jurisdiction to include additional countries and technologies, with a deadline of March 13, 2027, to issue regulations covering Russia, Iran, North Korea, Cuba, and Venezuela [6]. The rule also introduces whistleblower provisions, with the Financial Crimes Enforcement Network (FinCEN) proposing a rule in April 2026 to provide monetary rewards for tips regarding violations of outbound investment regulations [6]. As the regulatory framework evolves, institutional investors, fund managers, and multinational tech firms must reassess their cross-border portfolio allocations and compliance obligations [2][4].

Sources

Outbound investment Technology sanctions