TikTok is currently under investigation by the Financial Conduct Authority (FCA) in the United Kingdom due to allegations that it operates an unregistered cryptocurrency exchange.
The Financial Conduct Authority (FCA) may soon conduct an investigation into TikTok due to suspicions that the platform is conducting an unregistered crypto exchange in the United Kingdom.
This prospective regulatory issue is the latest addition to TikTok’s ever-expanding list of challenges, which also includes persistent criticism regarding privacy and child safety.
A compliance expert penned a letter to the Financial Conduct Authority (FCA), the UK’s financial overseer, informing them that TikTok may be conducting an unregistered cryptocurrency exchange in the country, according to local media.
In-app currency known as “TikTok Coins” serves as the foundation of TikTok’s virtual economy, which enables users to acquire virtual tokens with actual cash. Holders may exchange these for virtual gifts and distribute them to their preferred content creators.
This system increases user engagement and offers creators a revenue stream for the platform. Nevertheless, compliance specialists regard it as a strategy to enable unregulated financial transactions, citing regulatory vulnerabilities in the FCA’s supervision.
As per compliance experts, the FCA’s anti-money laundering (AML) and counter-terrorism financing (CTF) regulations should apply to TikTok’s virtual coin system. This is due to the fact that it facilitates the exchange of virtual assets for fiat currency.
The FCA’s list of approved firms indicates that TikTok has not registered with the regulator as either a digital asset exchange or a money service business. This is worth noting. Stringent financial supervision would necessitate that the social media platform adhere to these two categories.
The absence of such a registration poses a risk of inadequate supervision, as indicated in the letter to the FCA. In particular, the platform is more susceptible to being used for illicit activities, such as money laundering, due to the lack of clarity regarding the source of funds used to purchase TikTok Coins.
The compliance expert also emphasized TikTok’s lack of transparency in the verification of user accounts, particularly those with minimal information. Users could potentially engage in illicit activities without detection due to the absence of distinct identification, as stated in the letter.
However, in 2021, TikTok prohibited cryptocurrency advertising on its platform. In spite of this, numerous crypto commentators who utilize the platform continue to entice users into questionable crypto schemes. Based on the Solana blockchain, SonicX is a novel clicker game that TikTok introduced last week.
It is important to note that the FCA has been intensifying its efforts to regulate the digital asset sector as these concerns continue to escalate. Out of approximately 500 applications, the regulator has registered only 48 crypto firms thus far. The rejection rate for crypto firms applying for licenses is 87%, which is indicative of the UK financial watchdog’s stringent standards.
In July, the regulator reaffirmed its dedication to this objective by imposing a sanction on Coinbase’s UK division for failing to comply with AML standards.
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