TikTok Under Fire: Accusations of Operating as Unlicensed Crypto Exchange in UK

The popular social media platform TikTok is facing scrutiny after allegations emerged that it may be functioning as an unregistered cryptocurrency exchange in the United Kingdom. These claims were brought to light in a letter sent by a former compliance consultant for a major private bank to the UK’s Financial Conduct Authority (FCA).

At the heart of the controversy is TikTok’s reward system, which allows users to purchase TikTok Coins and use them to send virtual gifts to content creators. These gifts can then be converted into diamonds, which creators can exchange for real money. This system, according to the letter, could potentially enable users to indirectly exchange virtual currency for fiat, raising red flags about the platform’s compliance with financial regulations.

The former compliance consultant argues that this mechanism facilitates money transmission and the exchange of crypto-like assets without the necessary licensing from the FCA. The letter recommends that the UK regulate TikTok under anti-money laundering and terrorist financing laws, citing the current structure as a high-risk proposition.

One of the primary concerns is the potential lack of adequate anti-money laundering (AML) controls within TikTok’s system. The FCA has been warned that without proper registration, the platform could be exploited for money laundering or other illicit activities.

While TikTok Coins may not fit the strict definition of cryptocurrency, their use in exchanging virtual assets and subsequent conversion to fiat currency raises questions about the legal framework surrounding such tokens. The ambiguity in the system’s structure has led to inquiries about how TikTok’s application aligns with current UK financial laws.

This is not the first time TikTok has faced legal scrutiny. The platform is currently under investigation in Australia, where authorities are examining potential money laundering risks. The Australian Transaction Report and Analysis Centre (AUSTRAC) is looking into allegations that TikTok’s payment system was used to transfer funds linked to criminal activities, particularly after Turkey reported large transactions on the platform connected to illicit operations.

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

As regulators worldwide continue to grapple with the intersection of social media, virtual currencies, and financial regulations, the outcome of this scrutiny could have far-reaching implications for TikTok and similar platforms in the future.