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Bybit's Strategic Exit from Japan: Navigating Regulatory Challenges by 2026

In a significant move, Bybit, the world's second-largest cryptocurrency exchange, has announced plans to withdraw its services for Japanese residents starting in 2026.

This decision comes amidst increasing scrutiny from Japan’s Financial Services Agency (FSA), which mandates that all crypto exchanges operating in the country must be registered and compliant with local regulations.

As part of the exit strategy, Bybit will implement gradual account restrictions, allowing users some time to manage their positions and withdraw funds before full account limitations take effect.

In an effort to assist users who believe they have been inaccurately classified, Bybit is urging them to complete Identity Verification Level 2 before January 22, 2026.

Japan's regulatory environment for digital assets has become one of the most stringent globally, with the FSA enforcing ongoing compliance measures and holding unlicensed exchanges accountable.

The move follows Bybit's earlier suspension of new user registrations in Japan, an action taken while it was reviewing local regulatory requirements.

While facing obstacles in Japan, Bybit is simultaneously expanding operations in other jurisdictions, including the UK and the UAE, where regulatory frameworks are more favorable.

Recent reports suggest that Bybit is exploring potential acquisitions, such as South Korea's Korbit exchange, to navigate regulatory barriers effectively in Asia.

Overall, Bybit's exit signals a broader trend among crypto exchanges adapting to increasingly stringent regulations in their operating markets.

As the crypto landscape evolves, it remains to be seen how other exchanges will respond to similar regulatory pressures in highly regulated environments like Japan.