TikTok Coins Might Be a Crypto Exchange, Expert Tells FCA

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TikTok might be functioning as a digital asset exchange in the UK, as noted by a compliance expert to the Financial Conduct Authority (FCA), according to a report from Financial News.

A letter sent to the FCA, which was reviewed by the publication, indicates that TikTok’s virtual coin system and its creator rewards initiative could fall under crypto asset-related activities as defined by the regulator.

The virtual economy of TikTok relies on a coin system termed ‘TikTok Coins’, an in-app currency facilitating user interaction and support for content creators. Users can purchase TikTok Coins with real money to send virtual gifts to their preferred creators.

The compliance expert contends that this framework effectively allows the conversion of virtual assets to fiat currency, necessitating that TikTok comply with the FCA’s anti-money laundering and counterterrorism financing regulations.

Currently, TikTok is not registered with the FCA as either a money service business or a digital asset exchange, according to the regulator’s approved firms list.

The letter sent to the FCA specifies that the absence of registration poses a risk of insufficient oversight concerning the source of funds used for acquiring virtual coins.

The FCA has intensified its scrutiny of digital assets, allocating additional staff and resources for sector monitoring. By October 2024, it had authorized only 48 out of approximately 500 applications from crypto firms, illustrating its increased vigilance.

This commitment was emphasized in July when the FCA imposed a fine on Coinbase’s UK operations for not adhering to money laundering standards.

The compliance specialist pointed out risks stemming from a “lack of transparency” in user account identification, especially for accounts with minimal information, which elevates TikTok’s susceptibility to unlawful activities like money laundering. These assertions might push for further examination into the platform’s practices.

Earlier this year, Notcoin, a meme coin marketed as a promotional strategy, raised alarm regarding its authenticity within Telegram’s Web3 ecosystem as it has yet to be minted on the TON blockchain.

Last month, a June article examined the legal and ethical challenges posed by celebrity-endorsed meme coins, spotlighting possible liabilities from misleading promotions and the urgent need for transparency.

In May, discussions revolved around the rising impact of Key Opinion Leaders in the crypto domain, concentrating on their influence in promoting crypto initiatives and the complexities surrounding their reliability.

Just last month, insights into increased regulatory oversight of the crypto sector were shared, emphasizing the repercussions from the collapse of FTX, along with the SEC’s influence and developing governmental stances on crypto regulations.

Most recently, a March article highlighted the swift ascent and market ramifications of meme coins like BOME, which saw dramatic price variations after its launch by major exchanges like Binance.