TikTok, the popular social media platform, is facing allegations of operating as an unlicensed cryptocurrency exchange in the United Kingdom. A former compliance consultant for a leading private bank has sent a letter to the Financial Conduct Authority (FCA) outlining these claims.
The letter asserts that TikTok’s virtual currency system, which rewards users with tokens for engaging with content, can be indirectly exchanged for fiat currency. This, according to the consultant, makes TikTok subject to the FCA’s anti-money laundering (AML) and terrorist financing regulations.
“TikTok via its rewards program 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 states.
TikTok users can purchase virtual tokens, known as TikTok Coins, and use them to send virtual gifts to content 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 exploited by criminals for illicit activities and money laundering without the necessary AML safeguards.
However, the report raises questions about the classification of TikTok Coins as cryptocurrency. It only refers to them as “virtual coins” and “virtual tokens,” leaving uncertainty about whether they meet the criteria for cryptoassets. Additionally, the identity of the compliance expert behind the letter remains undisclosed.
This is not the first time TikTok has faced regulatory scrutiny. In Australia, Shadow Minister James Paterson previously referred the platform to the country’s AML authority.
