The US has told the Chinese owners of video-sharing app TikTok they must sell their shares or risk a US ban on the app, people familiar with the matter said.
The Treasury Department led the discussion though the Committee on Foreign Investment in the US, or Cfius, and requested Tiktok’s owner, ByteDance, recently, the people said. They asked to remain anonymous discussing private deliberations.
TikTok’s leadership has discussed the possibility of splitting from ByteDance, its Chinese parent, to help address concerns about national security risks, Bloomberg NEwS reported on Tuesday. One person said that the owners of TikTok can continue in a form of ownership but through a passive structure.
“If the protection of national security is the objective, the divestment will not solve the problem: the change of ownership will not impose any new restrictions on the flow of data or access,” the spokesperson TikTok’s Maureen Shanahan said in a statement. “The best way to address national security concerns is a transparent, US-based data protection and US user system, with robust monitoring, vetting, and -verified by a third party, which we implement.”
The company, which is subject to a national security review by Cfius, agreed last year to implement several changes in a plan it calls Project Texas. The proposal includes bringing in the American tech giant Oracle corp. to host US user data and review its software, and appoint a three-person government-approved oversight board. Many of the moves are already underway.
The administration is not convinced by TikTok’s proposal to add layers of management and separation from ByteDance, according to a person familiar with the matter. TikTok poured $1.5 billion into Project Texas, but the details were also met with skepticism on Capitol Hill.
The move marks a major advance for the administration in US-China relations at a time when the two countries are already at loggerheads over issues ranging from the fate of Taiwan to export controls on microchips to strengthening China’s cooperation with Russia.
The US National Security Council and the Treasury and Justice departments did not immediately respond to requests for comment. The Wall Street Journal reported the Biden administration’s request on Wednesday.
US officials have raised longstanding national security concerns about TikTok. FBI Director Christopher Wray told lawmakers in November that the Chinese government could use the app to control millions of users’ data or software, and its recommendation algorithm — which determines which videos to watch next. visible to users – “can be used for influence operations if they wish. .”
“Under Chinese law, Chinese companies must essentially — and I’m going to shorthand here — basically do what the Chinese government wants them to do in terms of sharing information or serving as a tool of the Chinese government ,” Wray told the House Homeland Security Committee. “That in itself is a lot of reason to be very concerned.”
TikTok Chief Executive Officer Shou Chew has been asked to testify before a House committee next week about the app’s data privacy and security practices, and the company’s relationship with the Chinese Communist Party.
A divestiture, which could result in a sale or initial public offering, is considered a last resort, to be pursued only if the company’s existing proposal to national security officials is not approved, according to the person familiar with this matter, who asked not. to be identified as dealing with non-public information.
The Chinese government would have to approve such a transaction, the people said.