The social media platform could face regulatory scrutiny in the UK over its virtual coins and creator rewards program.
Author: Texas Public Radio
Key Takeaways
- TikTok’s coin system could be classified as a crypto exchange activity.
- The FCA has not registered TikTok as a digital asset exchange.
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TikTok could be acting as a digital assets exchange in the UK, a compliance expert has told the Financial Conduct Authority (FCA), according to a report from Financial News.
A letter sent to the FCA, and reviewed by the publication, suggests that TikTok’s virtual coin system and creator rewards program could qualify as crypto asset-related activities under the regulator’s framework.
TikTok’s virtual economy is based on a coin system, called ‘TikTok Coins’, an in-app currency, allowing users to participate in various interactions and support content creators. Users can purchase TikTok Coins with real money and buy virtual gifts to send to their favorite creators.
The compliance professional argues that this system effectively enables the exchange of virtual assets for fiat currency, which should subject TikTok to the FCA’s anti-money laundering and counterterrorism financing regulations.
TikTok has not registered with the FCA as a money service business or digital asset exchange, according to the regulator’s list of approved firms.
The letter sent to the FCA claims that this lack of registration creates a risk of inadequate oversight regarding the origin of funds used to purchase virtual coins.
The FCA’s scrutiny of digital assets has intensified, with the regulator investing in staff and resources to monitor the sector. By October 2024, it had approved only 48 out of roughly 500 crypto firm applications, reflecting its heightened oversight.
This commitment was further underscored in July when the FCA fined Coinbase’s UK business for failing to meet money laundering standards.
The compliance expert highlighted risks from a “lack of transparency” in identifying user accounts, such as those with minimal information, increasing TikTok’s vulnerability to illicit activities like money laundering. These allegations may bring further scrutiny to the platform’s operations.
In January, Notcoin, a meme coin presented as a marketing concept, raised concerns about its legitimacy within Telegram’s Web3 ecosystem as it is not yet minted on the TON blockchain.
Last month, a June article examined how celebrity-backed meme coins pose legal and ethical risks, highlighting potential liabilities from misleading promotions and the importance of transparency.
In May, the growing influence of Key Opinion Leaders in the crypto industry was explored, focusing on their role in promoting crypto projects and the challenges associated with their credibility.
Earlier last month, increased regulatory scrutiny on the crypto industry was discussed, particularly in light of FTX’s collapse, including the SEC’s impact and evolving political perspectives on crypto regulation.
Recently, the article in March highlighted the rapid rise and market impact of meme coins like BOME, which experienced significant price fluctuations following its introduction by major exchanges such as Binance.
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