Is TikTok a Cryptocurrency Exchange Expert Platforms Coins Can Be Exchanged for Real Money Raising Concerns of Money Laundering and Terrorist Financing Calls for Strengthened Scrutiny

Coin World website reported:


According to Financial News, an expert recently sent a letter to the Financial Conduct Authority (FCA) in the UK, warning that TikTok should undergo anti-money laundering and counter-terrorism financing checks. The expert emphasized that the virtual tokens on TikTok can be indirectly converted into real money through its creator program, posing a risk of abuse.
Concerns over TikTok Coins
The expert targeted TikTok’s virtual currency system, TikTok Coins, which allows users to purchase coins with real money and give them as gifts on the platform or during live streams. Users can also convert the coins back into cash, a process similar to cryptocurrency transactions.
However, TikTok’s virtual currency system does not appear to use blockchain technology, but rather seems to be a proprietary membership token developed by the company.
According to the TikTok website, users can purchase or store coins through the App Store or Google Play, and manage coin purchases directly through the app store or the TikTok website. However, the gift and coin features are currently only available in certain regions.
At a time when cryptocurrency businesses are facing strict regulations, this system has raised regulatory concerns. Critics believe that TikTok’s handling of virtual tokens may undergo scrutiny similar to cryptocurrency platforms. Additionally, these cryptocurrency-like transactions have raised concerns about the security of user financial data, especially considering geopolitical sensitivities.
The expert wrote in the letter:
“Through its reward program, TikTok provides funds transfer services for the currency service industry, and arranges or makes arrangements for the exchange of encrypted assets with currency or currency with encrypted assets.”
TikTok is not yet registered with the FCA, and when asked if they would investigate TikTok, the FCA stated that they would not comment on individual companies.
Will FCA’s crackdown extend to audio and video app tokens?
The compliance expert pointed out that if there is no anti-money laundering registration, the source of funds used to purchase virtual tokens is unclear. According to the FCA’s guidance, TikTok’s activities make it fall under the category of currency service industry, which is required to comply with anti-money laundering and counter-terrorism financing regulations, including the obligation to register and report to relevant regulatory authorities.
The regulation of cryptocurrency in the UK is increasing, as the FCA recently released a report stating that over 87% of cryptocurrency company registration applications have been rejected in the past year to strengthen consumer protection and combat financial crimes related to cryptocurrencies.
The FCA stated that in order to ensure that cryptocurrency companies promote cryptocurrencies in a clear, fair manner and exclude any misleading content, companies must comply with standards to protect users’ investments in high-risk products and avoid fraud. The agency has strengthened marketing regulations for cryptocurrency assets.
The regulatory framework for the cryptocurrency industry in the UK will officially take effect in early 2024. Within three months of the regulations coming into force, the FCA has issued warnings to 450 companies illegally marketing cryptocurrency assets. The FCA has pledged to continue combating money laundering and illegal activities related to cryptocurrency fraud, and will establish higher standards for cryptocurrency regulation.