Short-form video app TikTok is under scrutiny for allegedly operating like a crypto exchange in the UK.
A compliance expert alerted the Financial Conduct Authority (FCA), suggesting that TikTok undergo money laundering and terrorist financing checks, the Financial News reported Tuesday. The expert highlighted concerns that virtual tokens on TikTok can be indirectly converted to real money through its creator program.
TikTok Coins Trigger Concerns Over Crypto-Like Operations
This scrutiny stems from TikTok’s virtual currency system, TikTok Coins. Users can purchase coins with real money and gift them on the platform or in livestreams. They can also potentially convert the coins back into cash. This process mirrors cryptocurrency transactions.
This system has raised regulatory concerns as crypto businesses face strict oversight. Critics argue that TikTok’s handling of virtual currencies could attract the same scrutiny as cryptocurrency platforms. Additionally, the crypto-like transactions raise concerns about user financial data security, especially given geopolitical sensitivities.
“TikTok via its rewards programme is facilitating money transmission to [money service businesses] and exchanging, or arranging or making arrangements with a view to the exchange of, cryptoassets for money or money for cryptoassets,” the letter reportedly says.
TikTok and the FCA didn’t return Cryptonews’ request for comment by press time.
Could FCA’s Crackdown on Unregistered Crypto Firms Extend to Video App’s Coins?
The compliance consultant noted that without anti-money laundering registration, the origin of funds used to buy virtual coins remains uncertain. The letter also pointed out that, based on FCA guidelines, TikTok’s activities qualify it as a money service business. This classification requires TikTok to comply with anti-money laundering and counterterrorism laws, including registration and reporting duties to relevant regulators.
The FCA has earlier taken action against crypto firms failing to comply with the new financial promotion rules introduced in October last year. This crackdown led to over a thousand warnings, signaling a strong effort to curb unregistered crypto entities promoting illegal services in the UK.
The regulator also reported an 87% rejection rate for crypto firms applying for licenses.
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