OISP 2.0: Treasury Previews Broader Outbound Investment Regime Under the COINS Act

On October 22, 2026, the U.S. Department of the Treasury released a Notice of Proposed Rulemaking (NPRM) to implement the Comprehensive Outbound Investment National Security (COINS) Act, enacted in December 2025. The proposed rule materially expands upon the Outbound Investment Security Program (OISP) rules in effect since January 2, 2025 (the “Existing OISP Rules”).

Although many provisions are substantively identical to the Existing OISP Rules, Treasury proposes to issue the new rules as a separate, standalone set of regulations, including because the Existing OISP Rules will remain in effect until the final rule takes effect.

The NPRM has no immediate legal effect; Treasury will set an effective date in a final rule. Comments are due December 7, 2026.

New Terminology

The NPRM replaces several core terms from the Existing OISP Rules:

• “Covered national security transaction” replaces “covered transaction.”
• “Covered foreign person” replaces “person of a country of concern,” and is defined primarily by a person’s relationship to a country of concern (unlike the Existing OISP Rules’ technology-linked “covered foreign person” definition).
• “Prohibited technology” and “notifiable technology” largely replace “prohibited transaction” and “notifiable transaction” as the terms capturing covered technologies.
• “Super intelligence (SI) systems” replaces “AI systems,” consistent with Executive Order 14434.

Similar to the Existing OISP Rules construct, a covered national security transaction under the NPRM involving a covered foreign person that “engages in” a prohibited technology is a prohibited transaction. A transaction involving a notifiable technology is permitted but must be reported to Treasury.

In the NPRM, the Existing OISP Rules’ “knowingly directing” concept is folded into the definition of covered national security transaction. As a result, knowingly directing a notifiable transaction, and not only a prohibited one, now triggers a notification obligation, subject to a recusal safe harbor. LP investments in non-U.S. funds are excluded from this prong.

Expansion of Covered Technologies

The Existing OISP Rules cover three sectors: semiconductors and microelectronics, quantum information technologies, and AI. The NPRM adds three more: high-performance computing and supercomputing, hypersonic systems, and biotechnology.

• SI systems: Unlike the Existing OISP Rules, which capture only a subset of AI-related activities, the NPRM would prohibit investment related to any SI system developed by a covered foreign person, eliminating the existing AI notification category. Treasury reasons that no single measure, benchmark, or threshold reliably distinguishes advanced models, and therefore proposes a categorical prohibition. The proposed SI system definition is broad. It covers generative systems, agentic harnesses, and embodied SI such as robotics and autonomous vehicles. Enhancing or extending a third-party model would count as development; internal, non-commercial use of off-the-shelf systems would not.
• Biotechnology: Biotechnology would be subject to prohibition only, with no notification tier. The prohibition would cover, inter alia:
  • biological systems to modify or produce certain compounds and materials (including agents and toxins, energetic materials, novel functional materials, pharmaceutical compounds (such as small molecules, vaccines, cell and gene therapies, and monoclonal antibodies, and their delivery mechanisms) and biofuels,
  • brain-computer interfaces,
  • biomanufacturing equipment,
  • biological sequencing,
  • bioinformatics tools, and
  • automated scientific discovery hardware and software.

  This is a discretionary expansion because the COINS Act did not require it. Treasury seeks comment on scope, including whether “pharmaceutical compounds” should be limited to advanced or frontier technologies, and whether the technical parameters for covered equipment should be narrowed.

• Semiconductors: Existing prohibitions are retained or would be expanded, and new prohibitions are added relating to high-bandwidth memory and radiation-hardened and photonic ICs. Notification requirements for other IC activity are retained and would be expanded.
• Quantum: Existing prohibitions are retained and would be expanded to cover algorithms or applications for quantum computing.
• HPC/supercomputing: The existing prohibition on supercomputers is retained, and would be extended to components enabling those capabilities, and a new notification requirement for high-bandwidth, low-latency interconnects would be introduced.
• Hypersonics: A prohibition on hypersonic systems (Mach 5+, military, and civilian), propulsion, certain enabling technologies, materials, and test facilities would be introduced, and notification would be required for sensors, control equipment, software, and materials capable of use in a hypersonic system.

Expansion of Covered Jurisdictions

In addition to China (including Hong Kong or Macau), the NPRM would designate Cuba, Iran, North Korea, Russia, and Venezuela “under the regime of Nicolás Maduro Moros” as countries of concern. Venezuela does not currently meet that description, following U.S. recognition of Delcy Rodríguez as head of state. Given existing sanctions on these additional jurisdictions, the practical impact is likely limited.

“Person of a Country of Concern” Becomes “Covered Foreign Person”

Treasury proposes to define “covered foreign person” largely consistently with the Existing OISP Rules’ “person of a country of concern,” while adopting the statutory framework from the COINS Act. Key features include:

• Citizens and permanent residents of a country of concern who are not also U.S. citizens or permanent residents remain covered.
• Covered entities are those incorporated in, organized under the laws of, or having a principal place of business in a country of concern.
• Members of the CCP Central Committee or other political leadership of a country of concern are covered, in addition to political parties and persons acting on their behalf.
• Coverage extends to parties with sufficient ownership by any of the foregoing, with the ownership test as follows: 50 percent or more in the aggregate, directly or indirectly, measured by voting interest, board voting power, or equity.
• A new “direction or control” prong would cover any entity whose management or policies are subject to direction by covered foreign persons, whether by ownership, contract, or otherwise.
• The Existing OISP Rules’ financial-metrics test moves into this definition. That test covers entities deriving more than 50 percent of revenue, net income, capital expenditures, or operating expenses from covered foreign persons, with a $50,000 per-entity threshold for aggregation.

No Screening Solution

The NPRM does not create a screenable list of covered foreign persons. The COINS Act authorizes Treasury to create a non-exhaustive public database, and while the NPRM indicates that Treasury is considering one, it does not establish a list. Any database would likely supplement, not replace, diligence, as Treasury continues to expect a reasonable and diligent inquiry in all cases.

Secondary Transactions

An open question under the Existing OISP Rules has been whether, and to what extent, the OISP applies to secondary transactions, including secondary acquisitions of LP interests. The breadth of the term “acquisition” has to be weighed against the burden of diligencing a fund’s entire portfolio.

In the NPRM, Treasury acknowledges that a U.S. person’s ability to conduct diligence “may be somewhat limited” in certain situations, including certain secondary market transactions. Treasury will assess whether an inquiry was reasonable and diligent inquiry based on the totality of the facts and circumstances. The NPRM does not, however, exclude secondaries from coverage. The new “secondary transaction” exception is narrow, as it covers services such as bank lending and custody, not secondary purchases.

Funds with Existing Assets

A related open question under the Existing OISP Rules has been how they apply to a fund’s existing assets. The LP prong of the existing “covered transaction” definition is framed prospectively, focusing on whether the fund “likely will invest” in a covered foreign person. Existing OISP guidance has not squarely addressed whether such holdings may instead be analyzed as indirect investments.

The NPRM suggests that a U.S. person’s investments in venture capital, private equity, fund-of-funds, or other pooled investment funds with pre-existing investments in a covered foreign person may constitute an indirect investment in that covered foreign person, regardless of whether the LP investment itself is covered. Notably, this statement appears in the NPRM’s preamble, not in the proposed rule text.

Next Steps

The NPRM is the first step in implementing the COINS Act; once finalized, the proposed regulations will expand the scope of the existing OISP. Interested parties may submit comments on the proposed regulations until December 7, and the final rule is expected to take effect in 2027.