Bybit Suspends New Accounts in Japan Amid FSA Regulatory Changes
Bybit, the second-largest cryptocurrency exchange by trading volume, has suspended new user registrations in Japan effective October 31, 2025. The decision comes as Japan’s Financial Services Agency prepares to implement stricter regulatory measures that could reshape the country’s digital asset landscape. The exchange emphasized that this pause represents a proactive approach to align with Japan’s evolving legal framework.
The suspension takes effect at 12 p.m. UTC on October 31, halting all new account sign-ups from Japanese residents and nationals. However, existing users will maintain full access to Bybit’s services for now. The platform stated its commitment to operating responsibly and complying with local laws and regulatory expectations. This move allows Bybit to concentrate resources on reviewing local requirements and determining how to meet new standards being drafted by the FSA.
FSA Regulatory Changes Driving Bybit’s Decision
Japan’s Financial Services Agency is preparing sweeping regulatory reforms to close loopholes in the current framework. The agency is considering moving crypto oversight from the Payment Services Act to the Financial Instruments and Exchange Act. This reclassification would treat crypto assets as securities, imposing higher business and compliance standards on exchanges.
Among the reforms under consideration is a new legal framework to outlaw insider trading in cryptocurrencies, a first for Japan. A working group within the FSA is drafting detailed definitions for what constitutes insider trading in crypto. This includes trades made using nonpublic information about token listings or exchange vulnerabilities. The change would place digital assets under the same legal treatment as traditional securities.
Japan’s Growing Crypto Market and FSA Concerns
Japan’s crypto market has grown rapidly, with over 12 million registered accounts as of early 2025. This represents more than triple the figure from five years ago. According to FSA data, deposits have exceeded ¥5 trillion ($34 billion). Chainalysis recently reported that Japan saw a 120% year-over-year increase in on-chain value received, ranking it among the top markets for digital asset adoption in Asia-Pacific.
Despite this impressive growth, regulators remain cautious about retail investor exposure. About 80% of domestic accounts hold less than ¥100,000 ($670), raising concerns about the risks faced by small investors. Officials warn that many investors rely on vague or misleading information in token white papers. This concern drives the FSA’s push for enhanced transparency and investor protection measures.
Bybit’s Compliance Efforts Following February Hack
In February 2025, Bybit suffered a $1.5 billion hack, one of the largest in crypto history, reportedly linked to North Korea’s Lazarus Group. Following this incident, the exchange intensified its compliance efforts significantly. Bybit introduced monthly proof-of-reserve reports and expanded third-party audits to reassure users and regulators.
Independent auditor Hacken later confirmed that Bybit’s reserve ratio remained above 100% following the incident, easing customer concerns. The exchange’s heightened transparency and regulatory cooperation mirror Japan’s broader expectations for crypto firms. This approach aligns with the FSA’s emphasis on accountability, financial soundness, and investor protection.
Potential Policy Shifts for Japanese Banks
The FSA is considering allowing banks to hold cryptocurrencies like Bitcoin for investment purposes. If approved, this would reverse a 2020 restriction and open the door for banks to participate in crypto trading and custody services. The agency is also weighing whether to let banking groups obtain licenses as cryptocurrency exchange operators. This would allow them to provide crypto trading directly and custody services under strict risk and capital requirements.
The FSA is expected to design a framework addressing risks tied to crypto volatility, potentially requiring banks to meet new capital and risk-management standards. The move could open the door for broader institutional adoption within Japan’s regulated banking sector. However, industry experts suggest that regulatory bottlenecks remain a significant challenge for innovation in the country.
Conclusion
Bybit’s suspension of new Japanese accounts reflects the exchange’s strategic response to Japan’s tightening regulatory environment. The move demonstrates how major crypto platforms are adapting to increased oversight while maintaining service for existing users. As the FSA finalizes its comprehensive regulatory framework, exchanges operating in Japan will need to demonstrate robust compliance measures and transparent operations to continue serving this rapidly growing market.
