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The Biden Administration has demanded that TikTok's China owners sell their stakes in the popular video app or face a possible U.S. ban, The Wall Street Journal (WSJ) said in an exclusive report.

This is a significant move taken by the administration in the midst of rising concerns from U.S. officials and legislators who feared that TikTok's U.S. user data could be shared with the Chinese government.

Bi-partisan opposition

This is also the first time TikTok faces a potential ban under the administration of a Democratic president. Biden's predecessor, Republican President Donald Trump, had attempted to ban TikTok in 2020 but was stopped by the U.S. courts, Reuters reported.

Some Republicans have accused the Biden administration of not taking a tough enough stance against TikTok, owned by Bytedance, a China-based company.

The sale demand was made recently by The Committee on Foreign Investments in the U.S. (CFIUS), an inter-agency committee under the U.S. government which oversees national security risks in foreign investments.

According to TikTok executives, 60 per cent of ByteDance shares are owned by global investors, 20 per cent by employees and 20 per cent by its founders. However, founders' shares can outsize voting rights.

Selling stakes will not solve anything: TikTok CEO

TikTok has pledged to spend US$1.5 billion (S$2 billion) on a program to protect U.S. user data and content from the Chinese government.

The security plan will wall off its U.S. operations and store all related data within the U.S.. The plan also gives U.S. company Oracle Corp access to TikTok's algorithm code and raised potential issues for government inspectors.

Critics, however, said the plan is not sufficient and any Chinese-owned company must still abide by demands from Beijing if called upon.

But TikTok's CEO, Shou Zi Chew, who happens to be Singaporean, said divesting the company from Chinese owners does not offer protection more than the proposed program, WSJ reported.

“I do welcome feedback on what other risk we are talking about that is not addressed by this,” he said in an interview with WSJ. “So far I haven’t heard anything that cannot actually be solved by this.”

Chew declined to say whether ByteDance founders were open to selling TikTok's shares.

In a previous interview with the Washington Post, Chew said he is hopeful that Congress would come to see TikTok as a place for creative expression, and that some of their anxieties would be resolved with an industry-wide policy instead of a single app ban.

On Thursday, China's foreign ministry responded by saying that the U.S. had yet to provide evidence that TikTok threatened national security. Ministry spokesperson Wang Wenbin said the U.S. should stop suppressing such companies at a daily briefing, Reuters reported. 

Negotiations with CFIUS over a way to secure TikTok data have been going on for more than two years. In 2020, the agency recommended divesting TikTok.

ByteDance unsuccessfully sought to close a deal with Walmart and Oracle Corp to shift TikTok's U.S. assets into a new entity.

Chew will be appearing before the U.S. Congress next week to address security issues before lawmakers.

Handling perceived threats from foreign-owned apps

WSJ predicted that the Biden administration's move to ban TikTok might face obstacles.

The Chinese government would not allow the TikTok algorithm to be sold, and the company could argue that any forced sale is equivalent to a ban. TikTok can also contend that any forced sale or ban would violate the Berman amendments and the First amendment.

Reuters also pointed out that a U.S. ban on TikTok could be greeted with protests by young Americans, with whom the app is popular.

The call for a potential ban on TikTok came at a time when Senate lawmakers were proposing legislation aimed to strengthen the government's legal hand in handling perceived threats from foreign-owned apps.

This means specific platforms or services could face a potential ban in appropriate circumstances. The proposal was quickly supported by Biden administration officials.

“This legislation would empower the United States government to prevent certain foreign governments from exploiting technology services operating in the United States in a way that poses risks to Americans’ sensitive data and our national security,” U.S. National Security Adviser Jake Sullivan said in a statement.

Not the first time TikTok faces ban

This is not the first time TikTok faces scrutiny over potential security issues.

The app has been banned from government devices by various countries including Taiwan, U.K., U.S. and New Zealand.

In early Dec. 2022, FBI Director Chris Wray expressed national security concerns over TikTok and its ability to control algorithms. To him, this "allows [TikTok] to manipulate content, and if they want to, to use it for influence operations."

Wray also claimed that China could use the app to collect users' data which could be used for espionage operations.

In Singapore, the Smart Nation and Digital Government Group has said that TikTok is only allowed to be downloaded onto government-issued devices on a "need-to" basis.

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Top image via Solen Feyissa/Unsplash.