US Treasury Secretary Scott Bessent in his 2025 official portrait. File photo. Image: US Department of the Treasury / Wikimedia Commons, Public domain, cropped
The US Treasury wants to stop American investors putting money into any Chinese company that builds AI, not only the ones training the biggest models. A proposed rule it issued on Thursday would turn today’s mix of bans and reporting duties for AI deals into a single blanket prohibition, and widen the list of targeted countries to include Russia, Iran, North Korea and Cuba.
The proposal implements the Comprehensive Outbound Investment National Security (COINS) Act, which Congress passed in December 2025 as part of the annual defence bill. It builds on rules in force since January 2025 that covered only China, Hong Kong and Macau.
A ban on backing any Chinese AI developer #
Under the current rules, whether an American could invest in a Chinese AI company depended on how much computing power its models were trained with and what they were built for. The most powerful or military-focused systems were banned; smaller ones only had to be reported to Treasury.
The new draft scraps that line. It would prohibit US persons from deals with a company in a “country of concern” engaged in the “development of any SI system”, and it removes the reporting tier for AI altogether. “SI” stands for super intelligence: the rule swaps the term in for AI to follow President Trump’s September order telling agencies to stop saying “AI”.
The definition is broad. It covers any machine-based system that can generate content such as text, images or code, plus any software or hardware built on one, naming agent harnesses, humanoid and other robots, autonomous vehicles and drones. A company that builds an agent layer on top of someone else’s model would count as developing AI. Using an off-the-shelf model strictly for internal, non-commercial work would not.
Why Treasury dropped the compute threshold #
Treasury argues that compute no longer separates dangerous models from the rest. “No single measure, benchmark, or threshold is currently sufficient to distinguish advanced models,” the proposal says, pointing to synthetic data, more efficient architectures, new post-training techniques and extra inference-time compute as ways developers now gain capability without bigger training runs. It adds that investors often can’t tell what a general-purpose model can do.
The risks it cites include AI that can “autonomously conduct cyberattacks” or help build weapons of mass destruction. Treasury Secretary Scott Bessent framed the package as protecting national security while keeping the US open to investment:
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.
Scott Bessent, US Treasury Secretary
Christopher Pilkerton, Treasury’s assistant secretary for investment security, said the rules address risks that arise “when foreign adversaries try to benefit from U.S. investment in key technology sectors.”
Who and what else is covered #
The rule applies to US citizens, green card holders, US companies and their foreign subsidiaries. It would cover private equity stakes, convertible debt, joint ventures, new facilities abroad and some fund investments. Buying publicly traded shares, index funds or ETFs is exempt, as are limited partner stakes of $2 million or less and deals worth under $50,000 a year (from reporting only).
Beyond AI, it tightens bans on advanced chips (adding high-bandwidth memory and photonic chips) and quantum computing, and adds supercomputing, hypersonic weapons and biotechnology, including brain-computer interfaces and tools for automated scientific discovery. Penalties would go up to the maximum under the International Emergency Economic Powers Act, and Treasury could force investors to sell.
The COINS Act names Venezuela “under the regime of Nicolás Maduro Moros” as a country of concern, but Treasury’s fact sheet says that regime “no longer exists” after the US recognised Delcy Rodríguez as head of state in March, so Venezuela does not meet the definition.
What happens next #
Comments are open until December 7, 2026, through regulations.gov (docket TREAS-DO-2026-0595). Nothing changes yet: the existing rules stay in force until a final rule sets an effective date, and the act gives Treasury until about mid-March 2027 to issue it. Treasury especially wants views on the blanket AI ban.
The timing matters for Chinese labs. DeepSeek has reportedly raised $15 billion from backers including Tencent and CATL, and the US sanctioned China’s answer to Y Combinator this week. The proposal lands a month after Trump and Xi Jinping agreed to start talking about AI.
Why it matters #
Washington is moving from policing only the most powerful Chinese AI to treating the whole sector as off limits for American private capital, from chatbots to robots. If the ban survives the comment period, US venture funds and their foreign arms would lose any route into Chinese AI startups outside the public markets.
Sources: US Treasury press release; Treasury, proposed Outbound Investment Security Program Regulations (NPRM); Treasury fact sheet and FAQs on the COINS Act NPRM.