UK Accuses TikTok of Operating as an Unregistered Crypto Exchange

Popular social media platform TikTok has been put under the magnifying glass over allegations that it may be operating as an unlicensed cryptocurrency exchange in the UK.

The claims were brought forward by a former compliance consultant from a leading private bank in a letter to the UK's Financial Conduct Authority (FCA).

The concern centers on TikTok's virtual currency, TikTok Coins, which users purchase to send virtual gifts to creators.

TIKTOK ACCUSED OF ILLEGALLY OPERATING AS A CRYPTO EXCHANGE IN THE UK

- A former compliance consultant accused TikTok of acting as an unregistered crypto exchange in a letter to the UK’s Financial Conduct Authority (FCA).

- TikTok’s reward system allows users to buy virtual… https://t.co/YqvGemx8jK pic.twitter.com/Yrd3OzkkxI

— BSCN (@BSCNews) October 15, 2024

These gifts are converted into diamonds, which can then be cashed out for real money.

The consultant argues this process resembles unregulated money transmission and crypto asset exchange, potentially violating UK financial regulations.

The letter recommends that TikTok be regulated under anti-money laundering (AML) and terrorist financing laws, warning that the platform's structure may enable financial transactions to bypass oversight.

TikTok Accused of Acting as Unlicensed Crypto Exchange in the UK

TikTok is accused of operating as an unlicensed crypto exchange in the UK, according to a letter sent to the Financial Conduct Authority (FCA). The letter claims TikTok’s virtual currency, TikTok Coins, can be… pic.twitter.com/g6mUrLu559

— VERITAS PROTOCOL (@veritas_web3) October 15, 2024

Uk Expresses Worries Over Inadequate Anti-Money Laundering Controls

The complaint raises concerns that TikTok's system may lack sufficient AML controls.

In a letter to the FCA, it was highlighted that, without proper registration, TikTok's platform could be vulnerable to misuse for money laundering or other illicit activities.

If the FCA intervenes, TikTok's financial operations, particularly its virtual currency system, may face regulatory scrutiny under laws governing digital currencies and money transmission services.

While TikTok Coins are not classified as cryptocurrency, their use in exchanging virtual assets and eventually converting them to fiat currency raises legal questions.

The ambiguity in the platform's financial framework prompts further scrutiny of how TikTok aligns with UK financial regulations.

TikTok's Global Legal Scrutiny

TikTok is facing renewed legal scrutiny, not only in the UK but also in Australia, where authorities are investigating potential money laundering risks.

AUSTRAC, the Australian financial watchdog, is probing allegations that TikTok's payment system was used to transfer funds linked to criminal activities, particularly following Turkey's claim that large transactions on the platform were tied to illicit operations.

These concerns have drawn the attention of regulators globally.

TikTok has also faced bans and legal challenges in countries like the United States (US), where user privacy and data protection issues led to its temporary blockage.

TikTok has sued the US government over a law that will force its Chinese parent company to divest the popular video app or face a ban across the country.

The lawsuit marks the first legal challenge since Congress passed the law in April https://t.co/oi6FmyIkmQ pic.twitter.com/v9MkO3XyXU

— Bloomberg (@business) May 7, 2024

US presidential candidate Robert F. Kennedy Jr. criticised the ban, calling it an overreach and an attack on freedom.

As for the UK's recent allegations, TikTok has yet to respond, though in past cases, the platform has denied involvement in illegal activities and reiterated its commitment to complying with local laws.

A spokesperson emphasized that TikTok takes its legal responsibilities seriously and has implemented stringent measures to prevent misuse of its financial features.

This latest inquiry follows a broader trend of regulatory actions against platforms like Telegram albeit over different issues, sparking questions about whether more social media apps will become targets of regulatory action.

Or is the rise of crypto crime the catalyst for TikTok coming under UK's scrutiny?