Bybit, the world’s second-largest cryptocurrency exchange by trading volume, announced it will suspend new user registrations in Japan starting October 31 as the country’s Financial Services Agency (FSA) prepares to roll out tighter oversight of the crypto sector.
In a statement on Wednesday, the exchange said the suspension is part of its “proactive approach” to comply with Japan’s evolving regulatory framework for digital assets.
Bybit Hits Pause in Japan — Compliance Move or Caution Signal?
According to the exchange, the move will take effect from 12 p.m. UTC on October 31, halting new account sign-ups from Japanese residents and nationals.
“It has always been Bybit’s commitment to operate responsibly and in compliance with local laws and regulatory expectations,” the exchange said.
Bybit added that the pause will allow it to “focus its efforts and resources on reviewing local regulatory requirements and evaluating how to best meet the standards outlined by Japanese authorities in the future.”
Existing Japanese users will not be affected for now, with all current services remaining operational.
They said it will provide further updates as discussions with the FSA continue. Bybit also apologized for any inconvenience caused and thanked customers for their “understanding and continued support.”
The decision comes at a critical time for Japan’s crypto industry, as the FSA moves to introduce the most sweeping regulatory changes in years.
The new measures aim to close loopholes in the current framework and strengthen investor protection in a market increasingly dominated by retail traders.
Can Exchanges Thrive Under Stricter Rules — or Is Japan Pushing Them Away?
Among the reforms under consideration is a new legal framework to outlaw insider trading in cryptocurrencies, a first for Japan, where such activity is not currently covered under existing law.
A working group within the FSA is drafting detailed definitions for what constitutes insider trading in crypto, including trades made using nonpublic information about token listings or exchange vulnerabilities.
Violations could trigger fines or even criminal prosecution once the amendments are passed.
The FSA also plans to submit amendments to the Financial Instruments and Exchange Act (FIEA) in 2026, reclassifying crypto from a “means of settlement” to a “financial product.”
The change would place digital assets under the same legal treatment as traditional securities such as stocks and bonds, allowing the Securities and Exchange Surveillance Commission (SESC) to investigate and penalize insider trading or market manipulation.
On the other hand, Japan’s financial watchdog is considering new rules to let banks hold cryptocurrencies like Bitcoin for investment purposes, a reversal of a 2020 restriction that barred such holdings over volatility concerns.
Under the new proposal, banks would be allowed to invest in crypto provided they meet stricter capital and risk management requirements. The same framework could also permit bank groups to register as licensed crypto exchanges, allowing them to offer digital asset trading and custody services to clients.
The broader reform effort reflects Japan’s attempt to bring crypto under the same regulatory umbrella as traditional finance.
Following several high-profile global exchange collapses, including FTX in 2022, the FSA has been working on measures to prevent domestic assets from being transferred abroad if a foreign exchange fails.
Japan Balances Growth and Oversight as Crypto Accounts Top 12 Million
In recent months, the agency has intensified its oversight of the sector. It established a “Crypto Assets and Innovation Division” in August to better monitor market developments and balance regulation with innovation.
In April, the FSA also published a discussion paper proposing to categorize digital assets into two types: “Funding/Business Crypto Assets,” used for fundraising purposes, and “Non-Fundraising/Non-Business Crypto Assets,” which include decentralized tokens like Bitcoin and Ethereum.
Japan’s tightening stance comes as the nation’s crypto adoption continues to grow. As of February 2025, over 12 million crypto accounts were registered in the country, more than triple the figure from five years ago, with deposits exceeding ¥5 trillion ($34 billion), according to the FSA data.
Chainalysis recently reported that Japan saw a 120% year-over-year increase in on-chain value received, ranking it among the top Asia-Pacific markets for digital asset adoption.
Still, officials have voiced concern about retail exposure.
Around 80% of domestic crypto accounts hold less than ¥100,000 ($670), and regulators warn that many investors rely on vague or misleading information in token white papers.
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