The EU has said it will ban a new service launched by TikTok in Europe that it believes could be “as addictive as cigarettes” unless the company offers “compelling” fresh evidence that children are safeguarded.

If the ban goes ahead, it would be the first time the EU has used sweeping new powers to impose sanctions on social media companies since its landmark Digital Service Act (DSA) came into force last August.

The commission gave TikTok until Wednesday to “bring arguments in its defence which the commission will carefully assess” before it takes a final decision on enforcement steps.

The digital commissioner, Thierry Breton, said the Chinese-owned video-sharing platform had “failed to prove” that TikTok Lite, which rewards users for watching clips, complied with obligations under the act, describing the service as “toxic”.

The commission said the reward feature could be suspended in the bloc if TikTok did not provide a satisfactory response to regulators’ concerns about the impact on users’ mental health.

Breton pointed out that the app was launched in France and Spain this month despite the fact there was an ongoing DSA investigation into the company launched in February over other concerns in regard to the safeguarding of children. He said TikTok was used by millions of children in Europe and the commission was “sparing no effort to protect them”.

The new watch-and-get-rewarded application offers users prizes such as Amazon vouchers, gift cards via PayPal or TikTok’s Coins currency for points earned through “tasks”, which include watching videos, liking content, following creators or inviting friends to join.

Breton told reporters that TikTok Lite “could be as toxic and addictive as cigarettes”. He said that while TikTok’s main app offered users “fun and a sense of connection”, it also “comes with considerable risk for our children: addiction, anxiety, depression, eating disorders, low attention spans.”

TikTok was given a 24-hour deadline last week to provide a risk assessment over the new Lite new service amid concerns it could encourage children to become hooked on watching videos.

On Monday the commission said it had not received satisfactory answers from TikTok over safeguards against addiction, despite already being under investigation in relation to other concerns about child safeguarding.

“While this first case is ongoing, TikTok chose to launch TikTok Lite, which under the laudable promise of letting you watch videos … creates financial incentives for spending more time on your phone,” it said.

Breton wrote on X: “Unless TikTok provides compelling proof of safety, which it has failed to do now, we stand ready to trigger DSA interim measures including the suspension of the TikTok Lite ‘reward programme’.

A TikTok spokesperson said: “We are disappointed with this decision – the TikTok Lite rewards hub is not available to under-18s and there is a daily limit on video watch tasks. We will continue discussions with the commission.”

The ultimatum comes as the future of the viral video platform’s US operation lies in doubt after lawmakers in Washington passed a bill over the weekend that could ban the app if TikTok’s Chinese owner, ByteDance, does not sell its stake in the American business. TikTok said on Monday it would fight any ban or forced sale in the courts.

The investigation launched in February under the DSA looking into the safeguarding of children on TikTok includes the issues of age verification, advertising transparency and the risk management of addictive design and harmful content.