Major cryptocurrency exchange Bybit announced it will begin phasing out services for residents of Japan starting in 2026, citing tightening regulatory expectations by Japanese authorities. The move follows earlier steps to halt new user registrations and reflects broader shifts in how digital asset platforms must respond to local compliance requirements.
Bybit, often ranking among the world’s largest exchanges by trading volume, said it will introduce restrictions on accounts of users identified as Japanese residents on a rolling basis. The exchange asked users who were flagged incorrectly to complete additional identity checks, underscoring a growing priority on compliance and user verification.
The gradual suspension of services is part of Bybit’s effort to comply with Japan’s Financial Services Agency (FSA), which requires crypto exchanges serving Japanese residents to hold appropriate local approvals. Bybit currently does not hold such registration.
Background: Earlier Moves and Registration Halt
The 2026 service restrictions come after Bybit took initial steps to limit its exposure in the Japanese market. In late October 2025, the exchange announced it would stop onboarding new Japanese users, effectively capping user growth from the country. The pause applied to both Japanese residents and nationals and took effect on October 31, 2025.
The suspension of new registrations was framed as part of Bybit’s proactive approach to align with evolving guidelines from the FSA. At that time, the platform stressed that existing users would not face immediate service disruptions.
Bybit has faced regulatory warnings in Japan in the past. Regulators have repeatedly made clear that exchanges must register locally to operate lawfully. This requirement stems from Japan’s established framework under the Payment Services Act, which governs virtual asset service providers.
Japan’s Regulatory Environment Tightens
Japan has long been one of the most regulated crypto markets globally. The FSA enforces stringent rules designed to protect investors and ensure operational integrity. Regulations require exchanges to register, verify customer identities, and implement robust safeguards for user assets.
In recent years, the FSA has expanded oversight efforts. The agency has requested major mobile app platforms like Apple and Google remove unregistered crypto exchange apps, including Bybit, from their stores. This step marked a notable escalation in enforcement intensity.
Japan’s regulators are also exploring broader reforms to classify certain crypto assets under financial product laws, a move that could redefine how digital assets are regulated within the country. These changes would align some crypto products with traditional securities and financial instruments.
Amid these developments, the FSA has emphasized investor protection and transparency. The agency’s discussions on enhancing custody standards, strengthening AML controls, and expanding disclosure requirements underscore its commitment to a tightly regulated crypto framework.
Global Context: Exchanges Navigate Complex Local Rules
Bybit is not the only exchange adjusting operations in response to regulatory pressure. Many global crypto platforms have faced similar challenges in various jurisdictions.
In other markets, exchanges like Binance have pursued licensing or local partnerships to maintain access. Binance, for example, re-entered the Japanese market by acquiring and rebranding a locally licensed exchange, thereby complying with local rules.
Other countries have taken tougher stances. In France, regulators blacklisted Bybit and other exchanges for operating without authorisation, prompting Bybit to suspend withdrawals and custody services for French users in 2025. This highlights a growing global pattern where regulators demand formal compliance for continued operation.
Beyond compliance enforcement, exchanges face evolving definitions of crypto assets, layered licensing regimes, and expanding requirements for AML, cybersecurity, and consumer protections. These developments reflect a global regulatory environment where crypto firms must invest heavily in compliance infrastructure if they hope to serve major markets.
Implications for Japanese Users
For individual traders and crypto holders in Japan, the phased restrictions mean they should closely monitor communications from Bybit as 2026 approaches.
While Bybit has said existing Japanese users will not face immediate service cuts, the gradual application of account restrictions signals that access may become increasingly limited. Users may need to consider alternative platforms that hold valid Japanese registration or explore local exchanges operating under FSA oversight.
The pause in new registrations already affected individuals looking to start fresh accounts on Bybit. Traders have had to shift to other services or comply with increasingly strict verification processes for any platform looking to serve Japan legally.
For larger players, this shift may accelerate the move toward fully licensed operations or partnerships with compliant local entities. Exchanges that meet Japan’s regulatory standards may benefit as demand shifts away from offshore platforms.
Bybit’s Strategic Adjustments
Bybit’s decision to scale back services in Japan comes amid broader strategic shifts. While reducing exposure in stringent markets, the exchange is expanding or re-entering other regions where it has secured regulatory approval.
For example, Bybit recently reentered the United Kingdom market after a two-year hiatus under a structure approved by local regulators. It also secured a Virtual Asset Platform Operator license in the United Arab Emirates, enabling it to offer regulated services including trading and custody.
These moves reflect a dual strategy: comply where possible and focus growth where regulatory clarity allows. Bybit’s broader global footprint and volume leadership position it to adapt to regional differences in regulation without sacrificing its competitive edge.
What Comes Next for Crypto Compliance in Japan
The FSA’s continuing push for tighter crypto regulation will likely influence how exchanges structure their services globally. As digital assets become more mainstream, regulators in Japan and elsewhere aim to ensure that investor protections do not lag behind innovation.
Industry participants expect additional rulemaking on areas such as proof of reserves, enhanced AML controls, and deeper reporting requirements for cross-border service providers. Platforms hoping to serve Japanese users may need to invest in local licensing regimes or adjust business models to comply.
For traders and investors, increased regulatory clarity means more predictable protections but also more stringent entry requirements. Compliance will be central to long-term participation in major global crypto markets.
Bybit’s announcement to phase out services for Japanese residents marks a significant moment in the evolving relationship between major crypto exchanges and national regulators. As Japan tightens oversight of digital assets, global platforms are responding with strategic adjustments that prioritize compliance and long-term access.
For users in Japan, this transition highlights the importance of choosing exchanges with clear legal standing under local law. For exchanges, adapting to diverse regulatory demands remains a core business challenge.
As 2026 approaches, both regulators and market participants will be watching closely how this shift unfolds and what it means for the future of crypto compliance in one of Asia’s most influential markets.
