Popular short video app TikTok is under investigation for allegedly operating as a cryptocurrency exchange in the UK.
A compliance expert has alerted the Financial Conduct Authority (FCA), suggesting that TikTok undergo anti-money laundering and anti-terrorism financing checks, Financial News reported on Tuesday.
The expert highlighted concerns that virtual tokens on TikTok could be indirectly converted into real money through its creator program.
TikTok Coins Raise Concerns Over Crypto Operations
This investigation stems from TikTok’s virtual currency system, TikTok Coins. Users can purchase the coins with real money and gift them on the platform or in live streams, as well as convert them back to cash, mirroring cryptocurrency transactions .
This system has raised regulatory concerns, as crypto companies face strict oversight. Critics argue that TikTok’s handling of virtual currencies could attract the same kind of scrutiny as cryptocurrency platforms.
Furthermore, “crypto-style” transactions draw attention to the security of users’ financial data, especially given geopolitical sensitivities.
“TikTok, through its rewards program, is facilitating the transmission of money for money services businesses and exchanging, or arranging or making arrangements for the exchange, of cryptoassets for cash or cash for cryptoassets,” the letter reportedly reads.
Could FCA regulatory pressure extend to TikTok coins?
The compliance consultant noted that without an anti-money laundering registration, the origin of funds used to purchase virtual currencies remains unclear.
The letter also noted that, based on FCA guidelines, TikTok’s activities qualify it as a money services business. Importantly, this classification requires TikTok to comply with anti-money laundering and anti-terrorism laws, including registration and reporting obligations to relevant regulators.
The FCA has already taken action against crypto firms that failed to comply with new financial promotion rules introduced in October last year. This crackdown has resulted in over a thousand warnings, signaling a strong effort to curb unregistered crypto entities promoting illegal services in the UK.
Finally, the regulator also reported an 87% rejection rate for crypto companies applying for licenses.
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