Bybit Announces Phased Exit from Japan Following Regulatory Warnings - What It Means for Crypto’s Future

Another crypto exchange folds under regulatory pressure. Bybit's planned retreat from Japan signals a familiar story: innovate first, ask for permission later—or not at all.

The Regulatory Hammer Drops

The Financial Services Agency (FSA) didn't mince words. Warnings piled up, compliance deadlines loomed, and Bybit's local operation faced an ultimatum: adapt or exit. They chose the latter, opting for a phased withdrawal rather than a costly regulatory overhaul. It's a calculated retreat, preserving capital for friendlier jurisdictions.

The Compliance Calculus

Japan's rulebook is no joke. Stringent anti-money laundering protocols, capital reserve requirements, and relentless reporting turn operational margins to dust. For exchanges built on global, borderless ideals, these national frameworks feel like archaic chains. The math is simple: the cost of compliance now outweighs the market's potential revenue.

A Bullish Paradox

Here's the twist for digital asset believers. Every forced exit like this doesn't spell doom—it refines the ecosystem. It pushes liquidity and innovation toward jurisdictions crafting smarter, not just stricter, rules. The capital and talent don't vanish; they migrate. It's a brutal, global sorting mechanism, separating sustainable projects from regulatory tourists.

The Finance Jab

Let's be cynical for a second. Traditional finance spends decades building regulatory moats. Crypto tries to vault over them in a single leap. Sometimes you clear the wall; sometimes you get a warning shot from the FSA. This is the price of disrupting a system designed to be undisruptable.

The takeaway? Bybit's move isn't a failure of crypto. It's a sign of a market maturing—painfully, messily, but inevitably. The weak hands get shaken out by regulators, while the strong build foundations that can actually last. The game continues, just on a different board.

TLDR

• Bybit will begin restricting access to services for Japanese users starting in 2026 due to regulatory pressure.

• Japanese authorities have long required crypto exchanges to meet strict registration and compliance standards.

• Bybit plans to gradually phase out services and has given users until January 2026 to meet KYC requirements.

• This move follows Bybit’s wider global strategy shift, focusing on markets with more favorable regulations.

Bybit, one of the world’s largest cryptocurrency exchanges, has announced it will begin restricting access to its services for Japanese residents starting in 2026. The move follows increasing regulatory pressure from Japan’s financial authorities, particularly the Financial Services Agency (FSA), which has repeatedly warned Bybit for operating without the necessary registration. This marks a significant shift in Bybit’s global operations as the exchange adjusts to the growing challenges of complying with stringent regulations in high-compliance regions.

The decision to limit services comes despite Bybit’s substantial presence in global markets. The exchange has faced ongoing issues with its ability to meet Japan’s strict regulatory standards, which require platforms to be fully registered with the FSA. As part of the phased exit, Bybit will gradually introduce account restrictions for Japanese users. Users who are flagged as Japan-based will need to complete Level 2 Know-Your-Customer (KYC) verification by January 2026 to avoid restrictions.

Japan’s Strict Crypto Regulations

Japan is known for its stringent approach to cryptocurrency regulation. All crypto exchanges operating in the country must register with the FSA and adhere to rules regarding customer protection, asset segregation, and anti-money laundering (AML). Japan’s regulations are some of the toughest globally, and exchanges that fail to meet these requirements are often forced to leave the market.

Bybit, which has operated in Japan for several years, has faced increasing pressure to comply with these regulations. Despite warnings from the FSA dating back to 2021, Bybit did not secure the necessary local licenses.

The FSA has also ramped up its scrutiny of foreign exchanges, even requesting tech giants like Apple and Google to remove unregistered crypto apps from their stores. This has further complicated Bybit’s position in Japan, forcing the company to reconsider its market presence.

Bybit’s Phased Exit and User Impact

In a statement released in December 2025, Bybit confirmed that it WOULD begin restricting access for Japanese users in a phased approach starting in 2026. The exchange will provide more information to affected users as the restrictions roll out, with specific details on how to manage their accounts and positions.

Bybit’s decision to implement a gradual exit aims to minimize disruption for users, allowing them time to transition to other platforms or make necessary account adjustments.

Users flagged as Japan-based will be required to complete Level 2 KYC verification by January 2026. This process includes submitting proof of identity and address. Those who fail to comply will face increasing restrictions, which could lead to a complete loss of access to their accounts. Bybit has advised users to stay informed through email updates regarding the changes.

Global Strategy Shifts Amidst Growing Regulatory Fragmentation

Bybit’s retreat from Japan is part of a broader trend of exchanges adjusting to rising regulatory scrutiny across the globe. In recent years, Bybit has faced challenges in several high-compliance regions, including Hong Kong, the U.S., and Canada. The company has exited markets like Hong Kong, where it was listed on the Securities and Futures Commission’s list of suspicious platforms, and scaled back its operations in others, such as France and Singapore.

Despite these challenges, Bybit has also been expanding in regions with more favorable regulations. The exchange recently secured a VIRTUAL Asset Service Provider license in the UAE and is working to re-enter the U.K. through a promotional agreement, circumventing direct registration. These moves  as a result reflect Bybit’s strategy of focusing on markets with more flexible regulatory environments, as it navigates the increasingly fragmented global crypto landscape.