Treasury Proposes COINS Act Rules: Biotechnology Added to Prohibited Technologies and U.S. Investment Restrictions Tightened for Chinese Pre-IPO Companies

On October 22, the U.S. Department of the Treasury issued the Notice of Proposed Rulemaking to implement the Comprehensive Outbound Investment National Security Act of 2025 (the COINS Act), enacted in December 2025.

The Proposed Rule builds on and expands the existing Outbound Investment Security Program (OISP), effective since January 2, 2025, which prohibits or requires notification of investments by U.S. persons in certain sensitive technologies in China. The Proposed Rule would broaden the program’s geographic scope beyond China and expand the covered technology sectors. Under the Proposed Rule, biotechnologies would be considered prohibited technologies for the first time.

The Proposed Rule has no immediate legal effect, and comments are due December 7.

Core Requirements

The Proposed Rule retains the OISP’s two-track “prohibit or notify” framework.

• Prohibited Transactions. The Proposed Rule prohibits a U.S. person, including its controlled foreign entities, from knowingly engaging in a covered national security transaction in any “prohibited technology.” A U.S. person would also be required to take all reasonable steps to prohibit and prevent any transaction by its controlled foreign entity from engaging in such transactions.

• Notifiable Transactions. The Proposed Rule requires a U.S. person to notify Treasury if the U.S. person knowingly undertakes a notifiable transaction—i.e., a covered national security transaction involving a “notifiable technology.” The notification requirement would also apply if the U.S. person’s foreign-controlled entity knowingly undertakes a notifiable transaction or if, after a transaction’s completion, the U.S. person learns of facts or circumstances that would have caused the transaction to qualify as a covered national security transaction.

Key Updates

According to Treasury Secretary Scott Bessent, the Proposed Rule is intended to prevent “adversaries from using U.S. investment to develop critical technologies that threaten U.S. national security,” while providing greater clarity to U.S. and foreign investors. To that end, the Proposed Rule materially expands the OISP’s reach across technologies, jurisdictions, covered persons, and restricted-party lists, while establishing a new nonbinding feedback process. The principal changes are summarized below.

• Expansion of covered technologies, particularly for AI and biotechnology. The existing OISP already covers (1) semiconductors and microelectronics, (2) quantum information technologies and (3) artificial intelligence (AI). The Proposed Rule expands the covered technologies to include (4) high-performance computing and supercomputing, (5) hypersonic systems and (6) biotechnology.

• Most notably, the existing OISP rules cover only a subset of AI-related activities, while the Proposed Rule prohibits investment relating to any superintelligence system developed by a covered foreign person, regardless of the compute thresholds and end uses.

• For the first time, biotechnologies are listed as “prohibited technologies.” 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, polymers, vaccines, blood and blood components, allergenics, cell and gene therapies, and monoclonal antibodies or other recombinant therapeutic proteins) and biofuels (i.e., fuels made or derived from bio-based feedstock)
• Brain-computer interfaces
• Biomanufacturing equipment
• Biological sequencing
• Bioinformatics tools
• Automated scientific discovery hardware and software

Treasury acknowledges that restrictions on biotechnology investments could create countervailing national security concerns, including public health risks and harm to U.S. businesses, and therefore seeks comments on the scope and potential effects of the proposed restrictions, as well as possible alternative approaches. In particular, Treasury requests input on whether and how to define the term “biological systems” more precisely.

• Expansion of covered jurisdictions. In addition to China (including Hong Kong or Macau), the Proposed Rule designates 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.

• Broader definition of “covered foreign person.” The Proposed Rule would redefine “covered foreign person” based on the relevant person’s ties to a country of concern. Notably, an entity could be covered even if it does not meet the 50% ownership threshold if certain persons associated with a country of concern direct or control its management or policies. The Proposed Rule would also define “principal place of business” to include the location of an entity’s headquarters, principal operations or principal management, and clarify that an entity may have more than one principal place of business. Accordingly, incorporation in a third country would not, standing alone, place an entity outside the Proposed Rule’s scope.

• Additional restricted lists. Under both the Proposed Rule and the existing OISP, an otherwise notifiable transaction becomes prohibited if the relevant target or any of its affiliates or subsidiaries meets specified U.S. restricted-party criteria. In addition to the sanctions and export control lists referenced under the existing OISP (i.e., the Entity List, Military End User List, SDN List, Non-SDN Chinese Military-Industrial Complex Companies List), the Proposed Rule adds two lists: the Department of Defense’s Chinese Military Companies List (the CMC List) and the BIOSECURE Act list of biotechnology companies of concern.

• Nonbinding feedback mechanism. As required by the COINS Act, the Proposed Rule establishes a process through which eligible persons may request nonbinding feedback from Treasury on whether a contemplated transaction would be prohibited.

Key Takeaways for Chinese Pre-IPO Companies and Multinational Companies, Particularly in the Life Sciences and Technology Industries

• The Proposed Rule could extend outbound investment restrictions directly into pharmaceutical R&D. Equity investments in covered biopharmaceutical developers and certain R&D joint ventures may be prohibited. The businesses most directly affected may include innovative medicine companies developing small molecules, vaccines, and cell and gene therapies; CDMOs providing biopharmaceutical development or manufacturing services; and companies developing biomanufacturing equipment, sequencing technologies, bioinformatics tools or laboratory-automation systems.
  
  
• Both Chinese and multinational companies operating in China could face compliance challenges. The Proposed Rule could restrict U.S. investment in Chinese biotechnology companies beginning at the preclinical or clinical stage. Multinational life sciences companies may also need to assess whether their Chinese subsidiaries, affiliates or China-based R&D collaborations qualify as covered foreign persons or involve prohibited technologies—particularly where projects are conducted through joint ventures, shared R&D platforms or contract development relationships with Chinese partners. 

• Companies may consider participating in the rulemaking process. Life sciences companies should map relevant R&D and manufacturing activities across their corporate groups, review China-based subsidiaries and collaborations, screen affiliates and subsidiaries against applicable restricted-party lists, and assess whether planned investments or joint ventures may need restructuring. Because Treasury has acknowledged the proposal’s potential effects on public health and U.S. businesses—and has specifically requested input on the meaning of “biological systems” and possible alternative approaches—affected companies may wish to submit comments explaining the proposal’s practical impact and recommending clearer definitions, exclusions, safe harbors or other appropriately tailored limitations