January 21, 2024 ☼ Payments
Discussions on TikTok and cryptocurrencies often address national security, but their intersection — TikTok Coins — remains less explored. TikTok Coins are digital currencies purchased with real money within the TikTok app. They are used to tip content creators during live streams and are categorized into values like diamonds and roses.
Unlike Meta’s failed Libra project, TikTok has taken a subtler approach. While Meta aimed to build a global payment system backed by reserves, TikTok restricts Coins to gifting creators and provides little public information about circulation or volume. Criticism has mostly been limited to isolated cases, like children overspending on Coins.
However, as TikTok’s creator economy grows, the platform’s rising revenue from Coins-based commissions could draw regulatory scrutiny. TikTok already faces questions about data collection from its billion-plus active users.
This leads us to the debate about whether TikTok should be banned. I lean towards free market principles and oppose arbitrarily banning businesses. After all, most concerns around TikTok center on the data it collects from its user base, which includes nearly 100 million Americans.
But other Chinese companies amass vast user data too. Take fast-fashion giant Shein. It arguably holds more sensitive information than TikTok (unlike TikTok, Shein knows your address). Should we therefore ban Shein too? Or ban all Chinese companies in the U.S. that reach a certain size? Banning TikTok could make the U.S. appear protectionist and anti-competitive, especially since users clearly find value in the app.
TikTok doesn’t pose a significant threat yet. Its largest current risks are user data and content algorithms. However, the stakes may rise if TikTok Coins grow in prominence. Collecting user financial data could elevate concerns beyond the realm of video preferences.
If TikTok Coins reach significant scale, the app must comply with payment regulations to prevent money laundering and illicit activities. Monitoring their growth is crucial, as they hold the potential to reshape online commerce.