The social platform TikTok is under scrutiny due to the use of virtual currencies similar to cryptocurrencies, raising concerns about financial security and legal compliance.
TikTok's Token System and its Characteristics
At the core of scrutiny are TikTok Coins, virtual tokens that users purchase with real money to use within the platform, such as gifting during live streams. These tokens have the potential to be converted back into cash, mirroring cryptocurrency transactions and igniting debates on whether tighter government oversight is necessary.
Compliance with Financial Legislation
A compliance expert sent a letter to the Financial Conduct Authority (FCA) highlighting that TikTok’s rewards could be seen as facilitating money transmission and engaging in cryptoasset exchanges. This could classify TikTok as a money service business, requiring adherence to strict anti-money laundering and counter-terrorism financing obligations.
Future of TikTok and Regulatory Norms
The FCA has ramped up its oversight of unregistered crypto entities, and TikTok may need to comply with new financial rules. Regulatory responses could set a precedent for digital platforms handling virtual currencies. For TikTok, compliance could mean a significant shift in managing its token system to fit within the UK's financial service legal framework.
This situation underscores the importance of overseeing digital platforms using virtual currencies and may prompt changes in the legislation governing such entities.