Bybit Halts New Account Registrations in Japan Amid Upcoming Regulatory Changes

Bybit Halts New Account Registrations in Japan Amid Upcoming Regulatory Changes

Bybit, the second-largest cryptocurrency exchange globally in terms of trading volume, has announced that it will stop creating new user accounts in Japan starting on October 31. This decision comes as the country's Financial Services Agency (FSA) prepares to implement stricter regulations in the crypto industry.

In a recent statement, Bybit explained that this temporary halt is part of its "proactive approach" to align with Japan's evolving rules around digital assets.

Key Takeaways

Bybit will suspend new registrations in Japan beginning October 31, 2025.
The move aims to ensure compliance with tighter regulations set to be introduced by the FSA.
Current account holders will not be impacted, and existing services will remain operational.
The FSA is developing new regulations to strengthen investor protections and curb insider trading in cryptocurrencies.
Japan's cryptocurrency market continues to grow, with over 12 million accounts and significant deposits reported.

Bybit's Compliance Measures and Current Impact

The suspension will be effective from 12 p.m. UTC on October 31, preventing new account sign-ups for Japanese residents and citizens. Bybit emphasized its dedication to responsibly adhering to local laws and regulatory expectations. The exchange stated that this pause will allow it to concentrate on understanding local regulatory necessities and assessing how to meet the standards set by Japanese authorities moving forward.

For now, existing Japanese users will not experience any disruptions, as all current services will remain operational. The exchange also mentioned it would keep its customers updated as discussions with the FSA progress, expressing gratitude for their understanding amid these changes.

The Regulatory Landscape: Impacts on the Crypto Market

This announcement coincides with a pivotal moment for Japan's cryptocurrency sector as the FSA looks to introduce significant regulatory reforms. These measures aim to close existing legal gaps and enhance protections for investors, especially as retail traders increasingly dominate the market.

One of the proposed reforms includes creating a legal framework to ban insider trading in cryptocurrencies, a first for Japan where such activities are presently unregulated. The FSA is working on defining what constitutes insider trading in crypto, focusing on transactions made based on confidential information about token listings or exchange vulnerabilities. Potential violations could result in fines or criminal charges once new amendments are enacted.

Additionally, the FSA is preparing to submit amendments to the Financial Instruments and Exchange Act (FIEA) by 2026. This would reclassify cryptocurrencies from “means of settlement” to “financial products,” subsequently subjecting digital assets to similar legal frameworks as traditional securities such as stocks and bonds. This change would empower the Securities and Exchange Surveillance Commission (SESC) to pursue actions against insider trading and market manipulation.

Conversely, the FSA is also considering new rules that would allow banks to hold cryptocurrencies like Bitcoin for investment, reversing a prior 2020 restriction due to volatility concerns. Under the proposed guidelines, banks would be permitted to invest in cryptocurrencies, given that they meet more stringent capital and risk management criteria. This could lead to bank groups registering as licensed crypto exchanges and providing digital asset trading and custody services.

The overarching reform represents Japan's commitment to integrating cryptocurrencies within the same regulatory framework as traditional financial systems. In response to past significant collapses of global exchanges, like FTX in 2022, the FSA aims to implement measures to safeguard domestic assets from being shifted overseas in such events.

Japan's Growing Crypto Environment and Regulatory Balance

In recent months, the FSA has ramped up its surveillance of the cryptocurrency sector. In August, it established a "Crypto Assets and Innovation Division" to effectively oversee market trends while fostering innovation.

Earlier this year, the FSA released a discussion paper suggesting the classification of digital assets into two types: “Funding/Business Crypto Assets” for fundraising purposes and “Non-Fundraising/Non-Business Crypto Assets” for assets like Bitcoin and Ethereum.

Despite a tightening regulatory stance, Japan’s interest in cryptocurrencies remains robust. As of February 2025, there were over 12 million registered cryptocurrency accounts in the country—three times the number from five years ago—with deposits surpassing ¥5 trillion (around $34 billion), according to data from the FSA.

Moreover, a report by Chainalysis highlighted a staggering 120% year-over-year growth in on-chain value received, placing Japan among the leading markets in the Asia-Pacific region for digital asset adoption.

However, regulators have expressed concerns regarding the exposure of retail investors. Currently, about 80% of domestic crypto accounts hold less than ¥100,000 ($670), with warnings that many investors depend on ambiguous or misleading information in token white papers.