Global Arbitration, Trade and Advocacy Update

The Comprehensive Outbound Investment National Security Act of 2025 Updates the U.S. Outbound Investment Regime: Key Takeaways

January 8, 2026

The Comprehensive Outbound Investment National Security (COINS) Act of 2025, which was part of the FY 2026 National Defense Authorization Act (the NDAA), became law on December 18, 2025. The COINS Act calls for the U.S. Department of the Treasury (Treasury) to issue regulations revising the outbound investment regulations (the Outbound Investment Regulations or OIR) that took effect on January 2, 2025. See Sidley’s prior client Updates on the original regulations here and the lessons learned six months into their entry into force here. While the COINS Act framework is similar to the OIR, it adds to the list of countries of concern and calls for several other potentially significant changes. The new rules will not take effect immediately. Instead, the legislation gives Treasury 450 days to promulgate implementing regulations. Treasury has significant discretion to shape key features of the new program through its implementing regulations.

Here are our key takeaways from the legislation.

1. The Overarching Framework is Similar to the Existing OIR

While the COINS Act adopts a different statutory architecture and terminology than the existing regulations, the basic framework is the same: Both prohibit or require notification of certain investments by U.S. persons into certain kinds of technology companies affiliated with countries of concern.

Using the COINS Act terminology, Treasury is required to issue new regulations that will prohibit or require notification of certain kinds of investments (“covered national security transactions”) by U.S. persons or their “controlled foreign entities” (e.g., foreign subsidiaries) in “covered foreign persons” (certain persons or entities from a “country of concern”) that are involved in certain “prohibited technologies” and “notifiable technologies.” Substantive differences between these concepts and analogous provisions in the OIR are discussed below.

2. Expansion of Covered Technologies

The COINS Act requires Treasury to identify “prohibited technologies” and “notifiable technologies” within the following sectors:

advanced semiconductors and microelectronics
artificial intelligence systems
quantum information technologies
high-performance computing and supercomputing (which is part of advanced semiconductors and microelectronics under the existing regulations)
hypersonic systems

The first four sectors are already addressed in the existing regulations. Hypersonic systems is a new category that is not covered by the current regulations. The legislation also authorizes Treasury to designate additional technologies in the future, either on its own initiative or at the request of the relevant congressional committees.

3. Expansion of Covered Countries and Persons

The OIR covers investments in certain “persons of a country of concern,” that is, certain entities or individuals affiliated with the People’s Republic of China, including Hong Kong and Macau. The COINS Act covers investments in “covered foreign persons,” which is similar to the OIR term “person of a country of concern,” with two significant changes.

First, the COINS Act expands the list of countries of concern to include not only the People’s Republic of China (including Hong Kong and Macau) but also Russia, Iran, North Korea, Cuba, and Venezuela (under the Nicolás Maduro regime). Given the recent capture of Maduro by the U.S. government, it is unclear whether Venezuela will be treated as a country of concern once Treasury issues the new regulations.

Second, “person of a country of concern” (under the OIR) and “covered foreign person” (under the COINS Act) both include, for example, entities that are incorporated, have their principal place of business, or are organized in a country of concern; government-controlled entities; and entities that are 50% or more owned by such entities. However, “covered foreign person” (under the COINS Act) also includes any member of the Central Committee of the Chinese Communist Party or member of the political leadership of a country of concern and entities “subject to the direction or control of” such individuals, a country of concern, or entities from a country of concern. The legislation leaves it to Treasury to define “direction” or “control.”

4. Scope of Covered Transactions

The OIR and the COINS Act cover a similar range of investments (e.g., equity interests or loans that carry equitylike rights). However, the COINS Act makes two significant changes.

First, under the OIR, a transaction is covered if an investment is made in person of a country of concern that engages in a prohibited or notifiable activity. By contrast, the COINS Act defines a “covered national security transaction” as an investment in a covered foreign person, regardless of whether that entity engages in prohibited or notifiable technologies but then applies the prohibitions and notification requirements to covered national security transactions “in a prohibited technology” or “in a notifiable technology.” This change is likely not material except potentially with respect to the treatment of limited partner investments in non-U.S. funds.

Under the OIR, a U.S. limited partner investment in a non-U.S. fund is not a covered transaction if the limited partner obtains a binding contractual assurance that its capital will not be used to engage in prohibited or notifiable transactions. Under the new legislation, the limited partner would need to obtain a contractual assurance that its capital in the fund will not be used for a “covered national security transaction.” Because that term encompasses investments in covered foreign persons regardless of sector, the contractual assurance would need to provide that the fund will not invest in any entities from a country of concern, even if the target entity has no connection to sensitive technologies. If this was the intent this represents a substantial narrowing of the limited partner exception and, if implemented as written, could significantly restrict U.S. participation in non-U.S. funds with exposure to countries of concern. However, it is not clear whether this was the intention or just an error in the drafting that Treasury could address in the regulations.

5. The Knowing Direction Obligation

Under the OIR, a U.S. person may not “knowingly direct” non-U.S. persons to undertake transactions that would be prohibited if undertaken by a U.S. person. The knowing direction obligation does not apply to situations in which a U.S. person knowingly directs non-U.S. persons to undertake transactions that would be merely notifiable if undertaken by a U.S. person. The new legislation makes two changes.

First, the COINS Act defines the scope of covered national security transactions to include knowingly directing prohibited or notifiable transactions (with one exception described below). Presumably, this means that (a) a U.S. person may not knowingly direct non-U.S. persons to undertake transactions that would be prohibited if undertaken by a U.S. person, and (b) if a U.S. person knowingly directs non-U.S. persons to undertake transactions that would be notifiable if undertaken by a U.S. person, the U.S. person must notify Treasury.

Second, under the OIR, the “knowing direction” obligation applies to all transactions that would be prohibited if undertaken by a U.S. person, including limited partner investments in non-U.S. funds. Under the COINS Act, the “knowing direction” obligation does not apply to limited partner investments in non-U.S. funds.

6. Expansion and Modification of Exceptions

The legislation makes several changes to the scope of transactions that may be excluded from the outbound investment restrictions.

De minimis transactions. The legislation directs Treasury to establish a de minimis threshold below which transactions would be excluded.
Ancillary and secondary transactions. New exceptions will apply to certain ancillary transactions by financial institutions and to transactions that are secondary to covered national security transactions. The legislation includes a new statutory definition of “ancillary transaction” and illustrative examples, such as bank lending, underwriting, and debt rating services. With regard to underwriting services, under the OIR, if an underwriter acquires shares preinitial public offering, that acquisition of shares is treated as a covered transaction. The COINS Act would exempt “underwriting services including, but not limited to, the temporary acquisition of an equity interest for the sole purpose of facilitating underwriting services.”
Ordinary and administrative business transactions. The legislation creates an exception for routine business activities, to be defined by Treasury through regulation.
Regulated foreign investment companies. Treasury is authorized, but not required, to create an exception for investments in securities issued by non-U.S. investment companies that are subject to foreign regulatory regimes comparable to U.S. Securities and Exchange Commission oversight.

The OIR provides certain exceptions, for example, with respect to the acquisition of publicly traded securities, that do not apply if the investor will be acquiring rights that go beyond standard minority shareholder protections. The COINS Act also includes these exceptions but does not qualify them with reference to standard minority shareholder protections. However, it is possible that Treasury will include such a qualification in its regulations.

7. Administration of the Outbound Investment Program

The COINS Act expands Treasury’s responsibilities in administering, enforcing, and shaping the outbound investment regime.

Nonbinding feedback. The COINS Act authorizes Treasury to provide nonbinding feedback regarding whether a transaction would be prohibited. Such feedback may be provided confidentially or through anonymized public guidance, and Treasury may decline to respond to frivolous requests. The COINS Act does not provide a similar mechanism to determine whether a transaction is notifiable; however, Treasury may in practice indicate that a transaction is not prohibited but subject to notification.
List of covered foreign persons. The COINS Act authorizes Treasury to publish a nonexhaustive list of covered foreign persons that engage in prohibited or notifiable technologies. The list would not eliminate the need for transaction-specific diligence (because it is not exhaustive), and covered foreign persons may petition for inclusion or removal. Members of the public and Congress may also submit information supporting the addition of entities.
Voluntary self-disclosures. The COINS Act establishes a self-disclosure framework for violations. The framework is consistent with self-disclosure regimes used in other national security–related regulatory programs. Any disclosure must include relevant facts, an explanation of why the U.S. person believes its conduct violated the outbound investment regime, and a proposal to mitigate resulting harm. Presumably, self-disclosure would mitigate penalties, although the legislation itself does not state so explicitly. Treasury is further required to create a process to identify prohibited or notifiable covered national security transactions that were not reported.
Report to Congress. Treasury must submit an annual report to Congress addressing enforcement actions, notifications received, trends in technologies, transaction structures, countries implicated, potential additions to the list of covered technologies, any removal of technologies from the prohibited category, and an assessment of the overall impact of the notification regime.
Cooperation with allies. The COINS Act directs Treasury, together with the U.S. Department of Commerce and other relevant agencies, to engage with allied and partner governments to promote aligned outbound investment controls and develop a coordinated multilateral strategy.

Sidley lawyers are closely monitoring developments relating to outbound investment restrictions and are available to answer questions regarding the legislation and its potential impact.

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