• by Karlene Lukovitz  @KLmarketdaily, March 16, 2023

The Biden administration is demanding that Chinese tech company ByteDance sell its share in TikTok or face a ban of the social video platform in the U.S.

TikTok confirmed the development, first reported by The Wall Street Journal, to CNN, but declined to elaborate on timing or other specifics. Instead, it offered a statement contending that if protecting U.S. national security is the objective, “divestment won’t solve the problem.”

“A change in ownership would not impose any new restrictions on data flows or access,” said TikTok spokesperson Maureen Shanahan. “The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting and verification, which we are already implementing.”

The ultimatum comes as several years of negotiations between TikTok and the Committee on Foreign Investment in the United States (CFIUS) have failed to resolve U.S. concerns about how China might access and use the data of U.S. TikTok users.

CFIUS initially appeared to be satisfied by a new TikTok initiative dubbed "Project Texas," in which TikTok committed to spending $1.5 billion to implement a stronger firewall between TikTok and ByteDance employees, under the supervision of Texas-based Oracle, according to NPR. But CFIUS is now demanding divestiture to reach a resolution.

Pressure to ban TikTok in the U.S. has ramped up significantly in recent weeks. Earlier this month, the House Foreign Affairs Committee advanced a bill that would revise the International Emergency Economic Powers Act to give the president the power to block technology deemed dangerous to national security.

President Joe Biden subsequently indicated that he welcomed the legislation, although Democrats on the committee and civil liberties groups argue that it would undermine freedom of speech.

TikTok’s CEO, Shou Zi Chew, is scheduled to testify before the House Energy and Commerce Committee next week.

Reports that TikTok has shared user data with ByteDance have not been proven, but the U.S. last year passed legislation blocking the app from U.S. government devices, after several states had already done the same. Since then, the EU and Canada have passed similar legislation.

India banned TikTok and 58 other apps in 2020, citing national security concerns, and CFIUS has previously forced divestitures of digital media businesses acquired by Chinese entities, including Applovin in 2017 and Grindr in 2020, points out Madison and Wall analyst Brian Wieser.

But other than India, the U.S. and other governments have so far stopped short of banning TikTok on personal devices. In the U.S., where there are more than 100 million users, a ban would undoubtedly result in loud protests, and possibly even have ramifications in the next election.