Regulation

UK Exposes TikTok As Potential Unregulated Crypto Platform

Published

4 weeks ago

October 15, 2024

TikTok has come under scrutiny after being accused of potentially operating as an unlicensed cryptocurrency exchange in the UK. The allegations were made public by the US attorney’s office in a letter sent to the UK’s Financial Conduct Authority (FCA) from a former compliance consultant for a leading private bank.

The letter claims that TikTok’s reward system may allow users to indirectly exchange virtual currency for fiat, raising concerns about the platform’s compliance with financial regulations.

UK Exposes TikTok As Potential Unregulated Crypto Platform

The accusations center around TikTok’s virtual currency, TikTok Coins, which can be bought by users and used to send virtual gifts to content creators. These gifts are then converted into diamonds, which creators can cash out for real money.

However, the former compliance consultant argues that this system facilitates money transmission and the exchange of crypto-like assets without the necessary licensing from the FCA.

The letter recommends that the uk should regulate TikTok under the anti-money laundering and terrorist financing law Act due to its current structure posing a high risk. The worries suggest that TikTok may facilitate financial transactions that can avoid oversight, including swapping virtual coins for fiat currency.

Concerns Over Anti-Money Laundering Regulations

The complaint also argues that TikTok’s system may not even have adequate anti-money laundering (AML) controls in place. In the letter, the FCA also warned that the platform could be used for money laundering or other criminal purposes if it is not properly registered with the FCA.

If the FCA steps in, the platform’s financial activities may be audited, especially concerning the virtual currency system and the regulations on digital currencies and money transmission services.

Though TikTok coins cannot be considered as cryptocurrency in a strict sense, their application in exchange for other virtual assets and their further exchange for fiat money raises questions on the legal framework of tokens. This lack of clear structure of the system leads to the questions of how the application of TikTok meets the current laws on finance in the UK.

Previous Legal Scrutiny and Investigations

TikTok has come under legal scrutiny in the past as well. The platform is also under investigation in Australia where the authorities are concerned with money laundering risks. The Australian Transaction Report and Analysis Centre (AUSTRAC) is currently investigating allegations that TikTok’s payment system was used to transfer the funds from the alleged crimes, particularly after Turkey said large transactions on the social media platform were related to criminal activities. Such allegations have resulted in enhanced focus by regulators across the globe.

Furthermore, TikTok has been banned and has faced legal consequences in several countries including the United States. The platform was blocked by the US authorities, and the issue of the protection of user’s privacy and their data was one of the reasons for this. Robert F. Kennedy Jr., a US presidential candidate, has come out against the ban, saying it is an attack on freedom and that the government’s worries are overblown.

TikTok has yet to respond to the latest allegations from the UK. In previous cases, the platform has consistently denied any involvement in illegal activities and emphasized its commitment to compliance with local regulations. A spokesperson for the company has stated that TikTok takes its legal obligations seriously and has implemented strong controls to prevent any misuse of its financial features.