US Treasury proposes barring new US private investment in Chinese brain-computer interface companies

By Inside BCI · Edited by Velco Dar · October 24, 2026

A US venture fund that wants a stake in the next funding round of a Chinese brain-implant maker, or of a Chinese start-up building EEG headsets, may soon be barred from investing. On 22 October the US Treasury proposed rules that would prohibit US investors from most new private investments in companies based in, or owned or controlled from, China, Hong Kong and Macau that develop or produce brain-computer interfaces.

Brain-computer interfaces are one of several biotechnologies Treasury wants to add to its outbound investment programme, which since January 2025 has restricted US investment in parts of China’s semiconductor, quantum and artificial intelligence sectors.

What Treasury proposed

The proposal implements the Comprehensive Outbound Investment National Security (COINS) Act, which Congress passed in the National Defense Authorization Act for fiscal year 2026, the annual defence law, and which became law on 18 December 2025. The act names five sectors: semiconductors and microelectronics, artificial intelligence, quantum information, high-performance computing and hypersonic systems. It also lets the Treasury Secretary, in consultation with the relevant congressional committees and after public comment, add technologies that enable the military, intelligence, surveillance or cyber capabilities of a country of concern. Treasury proposes using that power to add biotechnology.

The proposed rule covers the development or production of brain-computer interfaces, including invasive, partially invasive, non-invasive and hybrid systems that enable interaction between the brain and its environment, and the software that goes with them. On its face, that wording would reach implanted devices, EEG headsets, which read the brain’s electrical activity through the scalp, and the software written for them.

Brain-computer interfaces sit in the rule’s prohibited tier. Quantum sensing, in the same rule, is prohibited only where it is meant for military, government intelligence or mass-surveillance use. The brain-computer interface provision carries no end-use limit and no technical threshold. Biotechnology has no notify-only category, and the $50,000 minimum that exempts small deals applies only to transactions that must be notified, so direct deals of any size would be covered.

Treasury says certain biotechnologies in countries of concern pose an acute risk to US national security. It lists the proliferation of biological weapons, the development of brain-computer interfaces, harm to supply-chain security, and efforts by those countries to build their own versions of technologies with military, intelligence and mass-surveillance uses. It also acknowledges that restrictions could create public health risks or harm US businesses in the sector, and it invites comment on how to target them. None of its questions for commenters deals with brain-computer interfaces specifically.

The other biotechnologies on the prohibited list include pharmaceuticals made or modified using biological systems, from small molecules and vaccines to cell and gene therapies, along with biomanufacturing equipment, biological sequencing, bioinformatics tools and laboratory automation.

What would be covered

The rules apply to US persons: US citizens and permanent residents, US-organised entities and their foreign branches, and anyone in the United States. US persons must also take all reasonable steps to stop foreign entities they control from making deals that would be prohibited for a US person. Other non-US investors are not bound.

Covered deals include acquisitions of equity or rights to equity, such as loans that can turn into shares, and loans carrying equity-like rights such as profit shares or board appointments. They also include joint ventures, greenfield investments, meaning new operations built from scratch, and other expansions in a country of concern, and some investments by US limited partners, the outside investors in a fund, in non-US funds. A US person with decision-making authority at a foreign firm, such as an officer or director, who knowingly directs or approves such a deal by that firm is also covered.

A covered company includes one incorporated in a country of concern or with its headquarters, main operations or management there, and any entity at least 50 per cent owned, or controlled, from one. An entity anywhere is also covered if it holds stakes or control in such companies that engage in a covered technology and gets more than half of its revenue or net income from them. The same applies if more than half of its capital spending or operating costs is incurred through them. The prohibition applies only where the company, or for such a holding entity the companies it holds, engages in a prohibited technology. The countries of concern are China, including Hong Kong and Macau, Cuba, Iran, North Korea and Russia. Treasury names no companies and does not intend, for now, to publish a list of covered companies, so investors must make their own inquiries.

Several routes stay open. Buying shares that trade on a stock exchange or over the counter in any jurisdiction is excepted, unless the investor gains governance rights, such as a board seat, beyond standard minority shareholder protections. So are limited partner commitments of $2 million or less, or those backed by a binding assurance that the fund will not use the money for a prohibited deal. Deals made under binding, uncalled capital commitments entered into before the final rule takes effect are also excepted, as are bank lending and underwriting. Licensing and supply contracts are not investments and fall outside the rules unless used to evade them. Contracts attached to a covered investment are excepted unless they transfer technology or know-how.

Civil penalties could reach the greater of $250,000, adjusted for inflation, or twice the value of the transaction, so a $10 million investment could draw a penalty of up to $20 million. The Treasury Secretary could also order an investor to divest a prohibited investment. Investors can apply for a national interest exemption, a case-by-case waiver. The rules would not apply retroactively.

Comments are due by 7 December 2026. The COINS Act gives Treasury 450 days from enactment to issue its regulations, and the effective date will be set in the final rule. Until then, the 2024 rules covering semiconductors, quantum and artificial intelligence remain in force.

Who is exposed

China’s leading brain-computer interface companies have been raising large rounds and heading for public markets. Neuracle, which won China’s first approval for a commercial implanted brain-computer interface in March, had its listing application on the STAR Market, Shanghai’s technology board, accepted in June, with a planned raise of RMB 2.5 billion. BrainCo, the Hangzhou maker of EEG headbands and prosthetic hands, which has an office in Somerville, Massachusetts, was reported in January to have filed confidentially for a Hong Kong listing. Its pre-listing round of about RMB 2 billion was co-led by IDG Capital and Walden International, a San Francisco venture firm. StairMed’s RMB 500 million round, announced in March, was led by Alibaba, and existing investors including Tencent, OrbiMed, which is headquartered in New York, and Qiming Venture Partners followed on.

Under the proposal, US persons could not take part in future private rounds like these, including placements before a listing. Completed deals are unaffected, and the proposal names none of these companies.

Treasury cites data from PitchBook, a private-markets database, showing that almost 230 US-based investors completed about 300 initial and follow-on investments in the six sectors, as PitchBook classifies them, in countries of concern from roughly 2023 to 2025. It does not break out brain-computer interfaces. Chinese backers such as Alibaba, Tencent and HongShan, a Neuracle shareholder, are not bound by the rules. China’s national plan for the industry, issued in August 2025 by the Ministry of Industry and Information Technology and six other government bodies, aims to build two to three globally influential brain-computer interface companies by 2030.

Why it matters

Earlier federal action on brain-computer interfaces as a category stopped at consultation. The Commerce Department’s Bureau of Industry and Security listed them among emerging technologies in a November 2018 advance notice and sought comment in October 2021 on export controls for the technology, then withdrew that rulemaking in September 2025 without proposing a rule. US action has targeted named end users. In December 2021 Commerce added China’s Academy of Military Medical Sciences and 11 of its institutes to the Entity List, its export restrictions list, citing biotechnology work supporting military end uses, including alleged brain-control weapons. In August 2026 Plexon, a Dallas maker of neural recording equipment, settled a case over unlicensed shipments to the academy.

The proposal would add investment restrictions to the export enforcement already applied to brain-computer interface equipment. The White House’s America First Investment Policy of February 2025 had named biotechnology among the sectors where new outbound restrictions should be considered. In August 2026 the White House kept brain-computer interfaces on its list of critical and emerging technologies, under future computing.

China’s foreign ministry spokesperson Mao Ning was asked about the biotechnology proposal on 23 October. She said discriminatory measures against specific countries, and restrictions on investment based on an overstretched concept of national security, serve no one’s interest, and that China would take necessary measures to protect its legitimate rights and interests. The Biotechnology Innovation Organization (BIO), the US biotechnology industry association, agreed that biotechnology is a strategic industry but warned against an overly broad rule: “We cannot restrict our way to success.” In Congress, the Biotech Investment National Security Act was introduced in the House in June by John Moolenaar, chair of the House Select Committee on China, with Debbie Dingell, and in the Senate in August by Pete Ricketts and Elissa Slotkin. It would write pharmaceutical and biological products into the law and make licensing a prohibited technology from a covered company a covered transaction.

Where this sits on the four-jurisdiction posture map

Issue 01 of the Dargentic Intelligence Report classified four global regulatory postures on brain-computer interfaces: Rights-First (Chile), Horizontal Regulator (the EU, through the AI Act and GDPR), State-Patchwork (the US) and Industrial Builder (China and South Korea).

State-Patchwork (United States). Federal security action on brain-computer interfaces has come through export enforcement, the critical technologies list and now investment rules. Protection of neural data remains with the states.

Industrial Builder (China and South Korea). China’s targets, approvals and listing pipeline continue. The proposal would bar new US private investment in these companies while leaving listed shares open. South Korea is not a country of concern, so US investment in South Korean brain-computer interface companies is unaffected.

Horizontal Regulator (European Union). The EU has no binding outbound investment regime. A European Commission recommendation of January 2025 asked member states to review outbound investments in semiconductors, artificial intelligence and quantum technologies and to report by 30 June 2026. The Commission has not proposed rules since, and the recommendation does not cover biotechnology.

Not disclosed

Treasury has not estimated how many brain-computer interface deals the rules would affect. It says it would likely re-issue its existing guidance on listed shares, but has not said how that would apply to cornerstone allocations, the shares reserved for anchor investors, in Hong Kong listings. Public announcements of the Chinese rounds above do not name the investing fund entities. No Chinese brain-computer interface company had commented publicly by 24 October.

What to watch

Whether comments by 7 December press Treasury to narrow the brain-computer interface definition, for example for medical or non-invasive devices.

Whether Treasury issues final rules within the COINS Act’s 450-day deadline, and what effective date it sets.

Whether China announces countermeasures.

Whether BrainCo’s Hong Kong listing and Neuracle’s STAR Market listing complete before the rules take effect.

Whether Congress passes the Biotech Investment National Security Act, which would extend the rules to licensing prohibited technology from covered companies.

Sources

Primary:

Coverage:

Cross-reference to prior InsideBCI coverage:

policy US China Treasury COINS-Act outbound-investment OISP national-security biotechnology Neuracle BrainCo StairMed BIS AMMS State-Patchwork Industrial-Builder geopolitics-of-neurotech