TikTok is facing allegations that it operates as an unlicensed cryptocurrency exchange in the UK.
The accusation was outlined in a letter sent to the UK’s Financial Conduct Authority (FCA) by a former compliance consultant for a leading private bank, according to a report by Financial News.
The letter alleges that TikTok’s virtual currency system enables indirect fiat currency exchanges through its rewards program, and argues that as a result, the social media giant should be subject to the FCA’s anti-money laundering (AML) and terrorist financing regulations.
“TikTok facilitates the transfer of money to money service businesses through its rewards program and exchanges, or arranges to exchange, crypto assets for money or money for crypto assets,” the letter states.
TikTok users can purchase virtual tokens known as TikTok Coins and use them to send virtual gifts to creators. These gifts can then be converted into ‘diamonds’ and exchanged for fiat currency. The compliance expert argues that TikTok’s lack of FCA registration puts the platform at risk of being misused by criminals for illegal activities and money laundering without proper AML measures.
However, questions remain about the classification of TikTok Coins as cryptocurrencies. The report only refers to them as “virtual currencies” and “virtual tokens,” leaving it unclear whether they meet the criteria for crypto assets. Additionally, the identity of the compliance expert behind the letter was not disclosed, and was only described as “a former compliance officer at a leading private bank and asset manager.”
*This is not investment advice.