TikTok Accused of Running Illegal Crypto Exchange in the UK
Allegedly, TikTok has been operating as an unlicensed crypto exchange.
TikTok is a short-video platform popular in many countries. In the last few years, the platform has faced bans in several regions due to issues such as the circulation of inappropriate videos and concerns over user data privacy.
A letter sent to the Financial Conduct Authority (FCA) by a former compliance consultant for a cryptocurrency platform raises concerns about TikTok’s virtual currency operations. The sender noted that TikTok allows users to convert its virtual currency into real money, potentially violating anti-money laundering (AML) regulations.
The letter also claims that TikTok’s rewards program facilitates fund transfers through money service businesses. On TikTok, users purchase Coins to send gifts to content creators. These gifts are then converted into “diamonds,” which can be exchanged for fiat currency. According to the compliance consultant, this effectively means TikTok is operating as a crypto trading service and should be registered with the FCA.
The letter calls for the FCA to enforce AML and terrorist financing laws on TikTok. TikTok’s current structure raises concerns, particularly regarding monetary transfers that bypass regulatory oversight. Should the FCA take action, TikTok could face significant legal challenges, impacting content creators who rely on its virtual currency system.
Currently, TikTok is fully banned in the jurisdictions of India, Afghanistan, Somalia, Indonesia (temporarily restricted in the past), Pakistan (temporarily banned multiple times), and Jordan.
It will be interesting to see how the TikTok team responds to these serious allegations. Will they choose to discontinue the diamond and gift service, or will they introduce alternative solutions to address the concerns raised? Additionally, given the potential legal repercussions, the platform might need to reassess its entire virtual currency system to ensure compliance with financial regulations. Any changes could have a significant impact on TikTok creators, particularly those who rely on virtual transactions for income, as well as on the overall user experience. How TikTok adapts will be crucial for maintaining its standing in various markets, especially with increasing scrutiny from regulatory bodies.
Read also: Indian Consumer Forum Denies Action Against Crypto Exchange WazirX on Behalf of RBI
