TikTok, one of the most popular apps worldwide, is under scrutiny by UK authorities for suspicious activities resembling those of cryptocurrency exchanges. According to Financial News, a compliance expert has alerted the Financial Conduct Authority (FCA), suggesting that TikTok should be subject to anti-money laundering (AML) and anti-terrorism financing checks.
The concern revolves around the platform's virtual tokens, which can potentially be converted into real money through TikTok’s monetization tools for content creators. The expert raised the alarm that TikTok's "Coins" system could facilitate transactions similar to those in the crypto world, presenting risks that need regulatory attention.
TikTok Coins and Cryptocurrency Concerns
The platform's virtual currency system, TikTok Coins, allows users to purchase tokens with real money, which can be gifted during live streams or spent on the platform. These coins can then be converted back into money by content creators. This flow of virtual to real currency has raised red flags, as it mimics cryptocurrency transactions.
Given the strict regulatory oversight that cryptocurrency exchanges face, some critics argue that TikTok’s handling of virtual currencies should attract similar scrutiny. Additionally, concerns over financial data security are heightened, especially considering geopolitical sensitivities around the platform’s ownership and operations.
The core of the accusation is that TikTok, through its rewards program, facilitates the transfer of money in ways akin to financial services firms. This includes managing exchanges of crypto-like assets for real money, according to the expert’s analysis. As of now, TikTok has chosen not to comment on these allegations.
Could the FCA’s Crackdown on Unregistered Crypto Firms Extend to TikTok Coins?
The compliance expert also pointed out that TikTok's lack of AML registration means the origin of funds used to purchase these virtual tokens remains uncertain. Under the FCA’s guidelines, TikTok could be considered a financial services provider, which would require it to comply with AML and counter-terrorism financing regulations, including proper registration and reporting requirements.
However, the report does not make a definitive case for categorizing TikTok Coins as cryptocurrencies. Instead, they are referred to as "virtual tokens" or "virtual coins." Moreover, the identity of the compliance expert remains undisclosed, described only as a former compliance head at a leading private bank and wealth management firm.
Broader Regulatory Context and Past Issues
This is not the first time TikTok has faced regulatory scrutiny over its financial practices. The company was previously flagged by Australia's anti-money laundering agency, and U.S. authorities in Utah have filed lawsuits accusing the platform of facilitating money laundering through its rewards system and enabling child exploitation.
The FCA, on its part, has recently taken aggressive action against unregistered crypto firms that violated the UK's new financial promotion rules, introduced in October last year. The FCA has issued over 1,000 warnings, demonstrating its strong stance against illegal crypto services. Additionally, the regulator reported an 87% rejection rate for crypto firms applying for licenses, underscoring its strict regulatory approach.
Implications for TikTok
If TikTok Coins fall under the FCA’s jurisdiction as financial assets, the platform may face significant regulatory hurdles. Its current operational model could be subject to stringent AML controls and oversight to prevent illicit activities such as money laundering or terrorism financing. As TikTok hires more compliance staff, the outcome of these regulatory investigations could influence not only its financial operations but also its broader reputation and business model.