John Paul M. Joaquin Tech 03.16.2023 02:Mar AM EDT

ByteDance Must Sell TikTok Else Face Being Banned, US Government Demands

ByteDance is now between a rock and a hard place.

The Biden Administration recently released an ultimatum to TikTok's parent company: divest their stock in TikTok or risk being banned from the country to protect its national security.

The ultimatum comes at the peak of the Biden Administration's fervor of banning the installation and use of TikTok not just in government devices and systems but also in the devices of more than 100 million American users nationwide.

ByteDance Ultimatum Details

The US government, through its Committee on Foreign Investment in the United States (CFIUS), reportedly sent a "demand" to TikTok's parent company stating that it should sell all its stocks to the popular short-form video sharing app or suffer a nationwide ban, per The Wall Street Journal. This new demand came just days before TikTok's CEO appears in front of Congress to face questions from lawmakers over US user safety and security on the popular social media app, per The Verge.

Additionally, it is also a change in the CFIUS' tone, as the government agency previously agreed with ByteDance to allow TikTok to operate in the US provided that it partners with Oracle and create other measures meant to safeguard Americans' data, such as Project Texas. Unfortunately, a Bloomberg report revealed that CFIUS members from the government's justice department have been unwilling to accept TiKTok's proposal.

This demand is the first time the Biden Administration officially threatened ByteDance with a potential ban after two years in office, per Reuters. Meanwhile, his predecessor, former president Donald Trump tried to ban TikTok multiple times during his term but was blocked by US courts.

Though the ban's aim is to solve the national security concerns TiKTok poses by removing it from the country entirely, such a decision may result in potential political ramifications and significant legal hurdles since the American public, particularly young Americans, are using TikTok.

Democratic Senator Mark Warner said that the Biden Administration must do more to clarify what it believes are the national security risks TikTok presents to the country last week, presumably to help people understand why the app needs to be banned.

TikTok's Response

TikTok spokesperson Brooke Oberwetter confirmed the existence of CFIUS' new demand to ByteDance, adding that ByteDance's divestment of TikTok nor will a change in ownership will not ease lawmakers' fears about the app if protecting national security is the US government's objective in making the demand

"... a change in ownship would not impose any new restrictions on data flows or access," the spokesperson said. "Under Project Texas, TikTok data for our US users would be held to a significantly higher security standard than any comparable American company."

Though the demand is surprising for the company, it is considering the option of separating from ByteDance to help address concerns about national security risks.

Should the company decide to separate, though, its US business could be valued at $40 to $50 billion based on social media multiples and other factors.