Treasury COINS Act Rule Would Ban U.S. Investment in Chinese Super Intelligence and Hypersonics

U.S. investors would be barred from funding Chinese development of what Treasury now calls "super intelligence" systems, along with hypersonic weapons and propulsion, under a proposed rule published in the Federal Register on Oct. 26. The proposal would also extend the outbound investment program beyond China to Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime. Treasury issued the notice of proposed rulemaking on Oct. 22 to carry out the Comprehensive Outbound Investment National Security (COINS) Act, which Congress enacted on Dec. 18, 2025, as part of the fiscal 2026 National Defense Authorization Act.

The rule appears at 91 FR 67396 under Docket TREAS-DO-2026-0595 (RIN 1505-AC94). Comments are due Dec. 7, 2026. Treasury said a final rule will follow and will set the program's effective date, so nothing in the proposal binds investors yet.

"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," Treasury Secretary Scott Bessent said in a Treasury press release.

How the COINS Act Turns an Executive Program Into Statute

Subtitle C of the COINS Act adds a new Title VIII to the Defense Production Act of 1950, codified at 50 U.S.C. 4581-4589. That gives the Outbound Investment Security Program, which began under executive authority, a statutory footing for the first time.

Treasury chose to write a new rulebook rather than amend the old one. The proposal would create 31 CFR Part 851. According to a Simpson Thacher memo, the existing Part 850 regulations, in effect since Jan. 2, 2025, remain in force until the final rule takes effect and will keep governing transactions made in the interim.

The current program has been busy. Treasury says that in roughly 21 months it received approximately 100 notifications of investments in the semiconductor and AI industries, filed by venture capital firms, asset managers, investment banks and individual investors and entrepreneurs. The department has also published responses to more than 50 frequently asked questions.

Why 'Super Intelligence' Moves From Notifiable to Prohibited

The biggest change sits in artificial intelligence. Under the Part 850 rules, many AI deals only had to be reported to Treasury. The proposal renames AI systems "super intelligence systems" (SI systems) and places their development inside the definition of prohibited technology.

The notice explains the shift directly: "the Treasury Department, in consultation with interagency partners and the Executive Office of the President, has determined that the rapid advances in super intelligence capabilities of countries of concern warrant a broad prohibition on U.S. person investment in that sector."

Simpson Thacher reads the change as covering all development of these systems, "regardless of compute power or use case." In practice, that removes the compute thresholds investors relied on to separate reportable AI deals from banned ones.

Hypersonics, Supercomputing and Biotech Join the Covered Sectors

Title VIII names five technology sectors: semiconductors and microelectronics, AI systems, quantum information technologies, high-performance computing and supercomputing, and hypersonic systems. The last two are new. Treasury then used its own discretion to add a sixth. "Accordingly, the Secretary has added biotechnology to the proposed regulations," the press release states.

The proposed definition of "hypersonic system" is broad. It means "a vehicle or weapon delivery system capable of sustained atmospheric flight or very low Earth orbit flight at speeds of Mach 5 or greater." The rule lists hypersonic glide vehicles, hypersonic cruise missiles, air-launched or aero-ballistic missiles, maneuvering reentry vehicles and reusable hypersonic vehicles as examples. The notice adds that these examples "include both military and civilian hypersonic systems, which may include systems intended for spaceflight."

Simpson Thacher reports that the hypersonics prohibition reaches propulsion systems and fuels, certain specialized materials, testing facilities, and related digital twin and digital thread technologies. Certain sensors, guidance, navigation and control equipment, and software would fall in the notifiable tier. For supercomputing, the firm notes that the existing ban on certain advanced supercomputers carries over, and the proposal adds a notification requirement for high-bandwidth, low-latency interconnects. Biotechnology would be prohibited outright, with no notification tier.

Five More Countries of Concern, With a Venezuela Caveat

The program has covered only the People's Republic of China, including Hong Kong and Macau. Title VIII adds Cuba, Iran, North Korea, Russia and the Bolivarian Republic of Venezuela under the regime of Nicolás Maduro Moros.

That last entry comes with a twist. Simpson Thacher notes that Treasury takes the position in the notice that the Maduro regime no longer exists, so Venezuela does not currently meet the definition. The firm says Treasury still cautions investors to evaluate Venezuela-related transactions carefully.

The definition of "covered foreign person" also widens. Under Title VIII it can turn on a party's relationship to a country of concern, and it reaches members of the Chinese Communist Party Central Committee and the political leadership of a country of concern, as well as entities they own or control.

Live-Deal Feedback, Divestment Orders and No Criminal Penalties

Title VIII requires Treasury to set up a process through which a person can request "confidential non-binding feedback or anonymized public guidance for a potentially prohibited transaction." Simpson Thacher describes this as the first time parties could ask Treasury whether a specific, live transaction would be banned.

Enforcement changes too. Treasury would keep civil penalties up to the maximum allowed under section 206 of the International Emergency Economic Powers Act. It would drop the Part 850 criminal penalty language because Title VIII does not include criminal penalties. And the proposal states that "the Secretary may compel the divestment of a covered national security transaction in a prohibited technology."

The statute carves out underwriting services, bank lending, payment processing or clearing, prime brokerage and global custody. Title VIII also allows de minimis exceptions, but leaves the threshold amounts for the Secretary to determine.

What It Means for Contractors

This is an FY26 NDAA provision with direct reach into the defense-tech capital stack. Venture-backed hypersonics, propulsion and advanced materials suppliers raise money from the same funds, family offices and corporate investors that Treasury now regulates. Those investors will scrutinize any cap-table connection to a country of concern, including co-investors and portfolio affiliates, more closely than before.

Contractors building high-speed vehicles, reentry systems or spaceflight hardware should note that the hypersonic definition makes no military-only distinction. Firms in AI should assume the compute thresholds that once kept their foreign deals in the notification tier will not survive the final rule as proposed.

Companies with an interest in the scope of the SI, hypersonic or biotechnology definitions have until Dec. 7 to comment. Deals already in motion still fall under Part 850 until Treasury publishes a final rule and its effective date.