TikTok is developing a U.S.-only app with a separate algorithm and data system to comply with U.S. law and facilitate a potential sale amid political and trade tensions with China.

Chinese short-video app TikTok is reportedly developing a standalone app for U.S. users, built on a separate algorithm and data infrastructure from its international version. 

According to a Reuters report, the move aligns with efforts to comply with U.S. regulatory demands and possibly facilitate a future sale.

Employees have spent recent months duplicating the global app’s codebase, including AI models, user data, and key features, to create a U.S.-only version by September.

The upcoming app, internally dubbed “M2”, will store American user data separately and train recommendation algorithms on U.S.-only information. It resembles China’s Douyin model and will be unavailable outside the U.S., according to the report.

On Stocktwits, retail sentiment around Bytedance, the parent company of TikTok shifted to ‘neutral’ from ‘extremely bearish’ a day ago.

ByteDance’s decision to rebuild the app stems from efforts to comply with new U.S. trade rules and avert a potential ban. However, its proposal to spin off TikTok’s U.S. business stalled when Chinese officials reportedly opposed the move.

A potential consortium of buyers, supported by Susquehanna International Group, General Atlantic, KKR, Blackstone, Andreessen Horowitz, and potentially Oracle, awaits Beijing's green light to proceed with the algorithm handover.

The reported move comes after the Biden administration signed legislation mandating that TikTok sell its American operations to a U.S.-based entity due to national security concerns in April last year.

The original deadline for the ban, scheduled for Jan. 19, has since been delayed on three separate occasions by the Trump administration, allowing TikTok’s U.S. division additional time to arrange a sale.

The platform is widely viewed as a major competitor to Meta Platform Inc.’s (META) Facebook Reels and Alphabet Inc.’s (GOOGL) (GOOG) YouTube Shorts, features launched to mimic TikTok’s short-form video model.

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