The Treasury Department wants to stop measuring how powerful a Chinese artificial intelligence system is before deciding whether Americans may invest in it — and simply ban the investment. A proposed rule published in the Federal Register on Monday would replace the computing-power tests in the current outbound-investment rules with a flat prohibition: no U.S. investor could put money into any company in China or another country of concern that develops an "SI system," the rule's term for advanced artificial intelligence. Deals that today go ahead after a notification to Treasury would be prohibited outright, and the ban would reach further than AI — into biotechnology, including brain-computer interfaces, for the first time.
Under the rules in force since January 2025, whether a deal with a Chinese AI developer is banned, reportable or allowed turns mainly on computing power: models trained with more than 10^25 operations are off limits, and those above 10^23 must be reported to Treasury. The proposal drops the scales altogether. "No single measure, benchmark, or threshold is currently sufficient to distinguish advanced models," Treasury wrote, citing synthetic data and new training techniques that make smaller models far more capable. Developing any SI system would become a prohibited technology — and the definition reaches beyond the company that trains a model, to firms building AI agents and tools on top of someone else's model. Treasury's fact sheet says the proposal "would eliminate the existing notification requirement" for these transactions: the middle tier disappears, and a deal is either banned or outside the programme.
The rule would bind U.S. citizens, green-card holders, American companies and their foreign subsidiaries. It covers equity stakes, convertible debt, joint ventures, new facilities built abroad and some investments through funds. It applies to investments above $50,000, and it leaves ordinary market investing alone: buying publicly traded shares, index funds and exchange-traded funds is exempt, as are limited-partner stakes of $2 million or less in foreign funds. The countries of concern are China — including Hong Kong and Macau — Cuba, Iran, North Korea and Russia. Venezuela, named in the law under its former Maduro regime, no longer meets the definition, Treasury says, because the United States recognised a new head of state there in March. Violations would carry civil penalties, and Treasury could force an investor to sell.
The biggest expansion is biotechnology. Congress named five sectors in the law — semiconductors and microelectronics, artificial intelligence, quantum information technology, high-performance computing and supercomputing, and hypersonic systems — and gave the Treasury Secretary power to add more. Secretary Scott Bessent has used that power for biotech, the first sector added this way. Every covered biotechnology activity would be prohibited; there is no notify-only tier. The list runs from bio-derived compounds and pharmaceutical products — small-molecule drugs, vaccines, blood products, cell and gene therapies, monoclonal antibodies — to biomanufacturing equipment, biological sequencing, bioinformatics tools and laboratory automation. Brain-computer interfaces, devices that link the brain to a computer, are covered with no size threshold and no exception for civilian use. A licence deal on its own is not a covered transaction, but partnerships that add an equity stake or a joint venture would be caught. Treasury has asked commenters whether the definition should be narrowed.
Treasury states the purpose plainly: American money, and the know-how that travels with it, should not build up the military and surveillance technology of rival states. "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," Bessent said. In passing the law, Congress described the target as dual-use technologies that feed an adversary's military modernisation, surveillance states and human-rights abuses.
The programme began in 2023, when President Joe Biden signed an executive order restricting outbound investment in Chinese semiconductors, quantum computing and artificial intelligence. Treasury's Outbound Investment Security Program followed, in force since January 2, 2025 — and modest in scale: in roughly 21 months, Treasury says, it has received about 100 notifications of semiconductor and AI investments. In December 2025 Congress wrote the programme into law in the COINS Act, part of the annual defence bill, expanding it to more technologies and more countries. The October proposal, administered by Treasury's Office of Investment Security, is the plan for putting that law into force.
Supporters say the proposal recognises how modern military power is built. Craig Singleton, a senior fellow at the Foundation for Defense of Democracies, said it "sends an important signal to markets that Washington is tracking where US capital is flowing and what capabilities it is helping build," and that capital can speed up military-relevant capabilities just as surely as technology transfer can. Compliance lawyers warn the net is wide: Jason Chipman, a former Justice Department lawyer who advises on investment rules, said the new rule "will require more substantial compliance programs to manage risk." The sharpest criticism targets the biotech addition. A Massachusetts life-sciences association argued that American patients gain when U.S. firms can also spot promising innovations abroad; a patient-advocacy group objected that the draft places vaccines, cell and gene therapies and ordinary medicines in the same prohibited category as dangerous biological agents; and a taxpayer watchdog said Congress never named biotechnology, warning the addition could push drug research overseas and hand China an advantage in pharmaceutical innovation. China's Foreign Ministry said Washington was overstretching the concept of national security and interfering in normal business cooperation.
For now, nothing has changed: the proposal has no legal force, the existing rules stay in effect, and a final rule will set the date any of this begins. Public comments are due by December 7, 2026, and the law gives Treasury until about mid-March 2027 to finish.
For ordinary citizens, the touch is indirect but real. The rule is aimed at private deals — venture funds, joint ventures, new plants — not at the shares in a pension or 401(k): publicly traded stock and index funds are expressly exempt, so a worker's retirement account trading listed shares is untouched. Supporters make a plainer argument: the savings of American households should not end up financing the weapons and surveillance systems of a rival military. The trade-off, critics answer, is also carried by households: heavier compliance costs and narrower opportunities for the funds that do invest privately, and — if the biotech lines are drawn too widely — slower access for American patients to medicines developed with Chinese partners, and research jobs moving abroad instead of home. Both claims now sit in the same public file, open for comment until December 7.
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