TikTok has been accused of operating as an unlicensed crypto exchange in the UK in a letter sent to the country’s Financial Conduct Authority (FCA) by a former compliance consultant for a leading private bank.
As reported by Financial News, the letter claims that TikTok’s virtual currency can be indirectly exchanged for fiat through the platform’s reward system. As a result, it says the social media giant should be placed under the FCA’s anti-money laundering and terrorist regulations.
“TikTok via its rewards programme 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 says.
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Users can purchase so-called TikTok Coins and use them to send ‘gifts’ to content creators. These gifts can then be converted into ‘diamonds’ and cashed out for fiat. The letter claims that because TikTok is not registered with the FCA, the app is at risk of being used by criminals for illicit activities and money laundering without the proper anti-money laundering (AML) regulations.
However, it’s unclear from the Financial News report how TikTok Coins are classed as cryptocurrency since they are only referred to as “virtual coins” and “virtual tokens.” The report also fails to disclose the identity of the compliance expert, referring to them only as “a former compliance officer at a leading private bank and asset manager.”
TikTok has previously been referred to Australia’s AML authority by Shadow Minister James Paterson and is currently hiring more compliance staff. The state of Utah is also suing the platform over alleged money laundering through its reward system and for facilitating the sexual exploitation of minors.
