TikTok is coming under regulatory scrutiny for its virtual currency system, TikTok Coins, which users can buy, gift, and potentially convert back into cash operations resembling those of a cryptocurrency exchange.
According to a report by Financial News, a compliance expert has alerted the Financial Conduct Authority (FCA) about concerns that TikTok may need to undergo checks for money laundering and terrorist financing. The expert highlighted that users can indirectly convert TikTok Coins into real money through the platform’s creator program.
Concerns Over TikTok Coins
TikTok Coins allow users to purchase virtual currency with real money, which can be gifted during livestreams or used on the platform. Critics argue that this mechanism mimics cryptocurrency transactions, raising regulatory alarms as crypto businesses face rigorous oversight.
The scrutiny is amplified by worries regarding user financial data security, especially in light of geopolitical sensitivities. The compliance expert’s letter reportedly stated, “TikTok, via its rewards program, is facilitating money transmission to money service businesses and arranging exchanges between cryptoassets and cash.”
Regulatory Implications
Neither TikTok nor the FCA responded to requests for comment from Cryptonews by press time. The compliance consultant pointed out that without proper anti-money laundering registration, the source of funds used to purchase TikTok Coins remains unclear. The letter indicated that, per FCA guidelines, TikTok’s operations could categorize it as a money service business, necessitating compliance with anti-money laundering and counterterrorism laws, including registration and reporting to regulators.
The FCA has previously acted against crypto firms that failed to adhere to new financial promotion rules introduced in October of last year, issuing over a thousand warnings in an effort to curb unregistered entities promoting illegal services in the UK.
