The US Treasury is proposing a major expansion of national security restrictions on American investments abroad, bringing biotechnology and all superintelligence system development into a category of prohibited transactions. The changes would also widen scrutiny of artificial intelligence investments and expand the list of countries subject to restrictions.
Published on October 26, 2026, the proposal would replace the existing Outbound Investment Security Program with a revised regulatory framework. According to The National Law Review, the draft implements legislation enacted in December 2025 and could substantially change how American investors approach technology deals involving foreign companies.
Superintelligence enters restrictions
The most significant development for the advanced AI industry is the Treasury Department's proposed treatment of superintelligence. The draft adds biotechnology to the covered technology sectors and expands the artificial intelligence category to encompass all development of superintelligence systems as prohibited activity.
This distinction matters because the proposal does not simply add another reporting obligation. It places the specified superintelligence development activity within the prohibited category, meaning covered transactions involving that activity would face a ban rather than merely a notification requirement.
The proposal also builds on earlier technology restrictions. The original framework covered semiconductors and microelectronics, quantum information technologies, high-performance computing and supercomputing, and artificial intelligence. The subsequent legislation added hypersonic systems and broadened coverage of advanced integrated circuits and high-performance computing technologies.
Six countries face scrutiny
The proposed framework expands the countries of concern beyond China, including Hong Kong and Macau, to cover Cuba, Iran, North Korea, Russia and Venezuela under the Maduro regime. This expansion means investors must assess more than the immediate location of a prospective technology company.
The rules also examine ownership and financial connections. The definition of a person associated with a country of concern retains ownership and control tests, including a 50% threshold. Certain holding companies can also fall within the definition when more than half of their revenue, net income, capital expenditure or operating expenditure comes from qualifying persons.
More transactions covered
The proposed regulations reach several investment structures, including equity purchases, contingent equity arrangements, equity-like debt, joint ventures and certain conversions. They also cover greenfield investments, which involve establishing new operations rather than acquiring an existing business, as well as limited partnership interests in non-US investment funds.
Another important change concerns investors who knowingly direct transactions. The proposal extends this provision to deals that require notification, broadening its application beyond prohibited investments. Certain conversions would also become subject to a knowledge requirement.
Treasury proposes a broader understanding of what an investor knows. This includes actual awareness, knowledge of relevant circumstances, awareness of a high probability that an event could occur, or having reason to know. The investor's consideration of information supplied by Treasury, including material obtained through reasonable diligence, would become another factor.
Government lists add scrutiny
The draft introduces additional government lists into the due diligence process. These include the Defense Department's list of Chinese military companies and the Office of Management and Budget's list of biotechnology companies of concern under the BIOSECURE Act.
A transaction involving technology that would ordinarily require notification could become prohibited if the target company, an affiliate or a subsidiary appears on specified US government lists. The proposal also identifies certain permitted activities, including non-prohibited integrated circuit activity, high-bandwidth and low-latency connections for high-performance computing, and hypersonic sensors, software and materials.
Reporting and exemptions change
Investors would generally need to submit required reports within 30 days after completing a transaction, or within 30 days of discovering relevant information afterward. The proposed reporting requirements contain additional information demands, while supporting records would have to be retained for 10 years.
The framework provides a potential national interest exemption, which Treasury could make conditional on binding commitments. Authorized intelligence activities would also qualify for an exemption.
A separate feedback process would be limited to parties with a direct financial interest in an actual or prospective transaction supported by a binding document containing its material terms. Responses would not bind Treasury or the courts.
Enforcement already has consequences
The proposal arrives as Treasury demonstrates that the existing investment rules are already being enforced. On October 7, 2026, the department announced its first civil penalty under the current program: $200,000 over an investment of approximately $90,000.
The case involved Amidi, the parent company of Silicon Valley startup accelerator Plug and Play Tech Center. Its controlled Chinese fund failed to notify Treasury about an investment exceeding $90,000, made in April 2025, in Shanghai Qiongche Intelligent Technology Co., Ltd., also known as Noematrix. The company develops embodied artificial intelligence and robotics technology.
Treasury discovered the transaction through routine compliance and market monitoring, rather than a voluntary disclosure. The department also maintains a dedicated email address, [email protected], for reporting suspected violations.
Why it matters
The proposed changes would make the distinction between permitted, reportable and prohibited foreign technology investments increasingly important. Superintelligence development is explicitly included in the expanded prohibited category, while biotechnology becomes another area requiring careful examination. Investors must also consider indirect ownership, controlled foreign entities and connections to newly designated countries.
For American technology investors, the immediate priority is understanding how existing and prospective transactions fit within the proposed definitions. US persons would also be expected to take all reasonable steps to prevent prohibited transactions by foreign entities they control.
The proposal is not yet law. Treasury is accepting public comments until December 7, 2026, and the restrictions will not take effect until a final rule establishes an effective date. That process will determine the final scope of the superintelligence provisions and how companies must adapt their international investment activities.