Bybit is preparing to gradually scale back services for users based in Japan from 2026, marking a further shift in how global crypto exchanges navigate one of the world’s most tightly regulated digital asset markets.

The move follows months of regulatory pressure and earlier steps taken by the exchange to reduce its footprint in the country.

Bybit said the process will involve rolling account restrictions applied over time, rather than an immediate shutdown, as it aligns with Japan’s regulatory framework.

The development comes even as the exchange expands in other jurisdictions, underlining the uneven global regulatory landscape for crypto platforms.

Japan’s regulatory pressure

The phased restrictions will apply to users identified as Japanese residents, with Bybit implementing the measures on a rolling basis.

Users who believe they have been incorrectly classified have been asked to complete additional identity verification checks to resolve their status.

Bybit is not registered with the Financial Services Agency, which requires crypto exchanges serving Japanese residents to obtain local approval before offering services.

Japan’s regulatory regime has long been regarded as one of the strictest globally, shaped by past exchange failures and consumer protection concerns.

This framework has limited the ability of overseas platforms to operate freely in the country without a local licence.

Bybit’s decision to begin a structured withdrawal from 2026 reflects the growing difficulty for unregistered foreign exchanges to maintain access to Japanese users.

Earlier restrictions in Japan

The latest announcement builds on earlier actions taken by Bybit to curb its exposure to the Japanese market.

In October, the exchange halted new user registrations in Japan, citing ongoing discussions with regulators.

That decision signalled that continued full operations without registration were becoming increasingly unsustainable.

Regulatory scrutiny intensified in February, when Japan’s Financial Services Agency requested that app stores run by Apple and Google suspend downloads of five unregistered cryptocurrency exchanges.

Alongside Bybit, the list included MEXC Global, LBank Exchange, KuCoin, and Bitget. The move reinforced Japan’s stance that access to local users must be tightly controlled.

Industry figures have warned that this regulatory bottleneck is driving innovation elsewhere.

In July, Maksym Sakharov, co-founder and CEO of WeFi, said Japan’s strict oversight was pushing crypto development out of the country, as companies look for more flexible jurisdictions.

Despite the Japan pullback, Bybit remains one of the most active exchanges globally.

Rather than exiting heavily regulated markets altogether, Bybit has increasingly adopted jurisdiction-specific strategies, limiting certain services while expanding in regions with clearer or more accommodating frameworks.

Expansion beyond Japan

While scaling down in Japan, Bybit is simultaneously rebuilding its presence in other markets.

The exchange is reentering the UK after a two-year pause, launching a platform that offers spot trading and peer-to-peer services.

The UK return is structured through a promotions arrangement approved by Archax, rather than through direct UK registration.

Bybit has also strengthened its position in the Middle East.

Last month, it secured a Virtual Asset Platform Operator Licence from the United Arab Emirates’ Securities and Commodities Authority, eight months after receiving in-principle approval.

The licence allows the exchange to expand services in a region that has actively positioned itself as a hub for digital asset firms.

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Bybit to gradually scale back Japan services from 2026 due to tight crypto regulations

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In a sharp pivot from its crypto-friendly image, the United Arab Emirates has enacted sweeping new legislation that classifies basic cryptocurrency infrastructure, including Bitcoin wallets, as potentially criminal unless licensed by the Central Bank.

Legal experts from Gibson Dunn have flagged the law’s scope as unusually broad, warning that its language introduces significant risk for global technology providers.

This shift, embedded in Federal-Decree Law No. 6 of 2025, comes into force from 16 September and carries global consequences for developers and platforms offering crypto access.

The law replaces the 2018 banking statute and significantly widens the definition of financial activity. What sets this legislation apart is not only its scope but also its enforcement teeth.

Penalties for non-compliance range from fines of AED 50,000 to AED 500,000,000 (up to $136,000,000) and may include imprisonment.

Importantly, this applies not just to entities operating within the UAE but also to those whose products are accessible from within the country.

Licensing now applies to wallets, APIs and even analytics

The most consequential element of the new law is found in Article 62. It grants the Central Bank control over any technology that “engages in, offers, issues, or facilitates” financial activity.

The wording is broad enough to encompass self-custodial wallets, API services, blockchain explorers, analytics platforms, and even decentralised protocols.

This marks a fundamental change in how crypto infrastructure is regulated in the UAE.

Previously, licensing obligations focused on traditional financial entities, but the updated framework shifts this focus to include software and data tools.

According to developer analysis, even public-facing tools such as CoinMarketCap and open-source Bitcoin wallets may now require licensing to remain accessible within the UAE.

For the first time, developers may face criminal penalties for offering unlicensed crypto tools, even if they are based abroad.

This extension of jurisdiction signals a new regulatory posture that treats access to crypto as tightly as its ownership or exchange.

Communications and marketing now fall under regulation

The crackdown does not stop at financial infrastructure. Article 61 of the same law defines the marketing, promotion, or advertising of financial services as a licensable activity.

In practice, this means that simply hosting a website, publishing an article, or sharing a tweet about an unlicensed crypto service could be considered a legal violation if that content reaches UAE residents.

This change dramatically expands the compliance footprint for companies and developers.

Gibson Dunn highlights that these provisions materially broaden the enforcement perimeter, especially for firms with no formal presence in the UAE.

The law applies to communications that originate outside the country but are accessible inside it.

The result is a regulatory landscape where developers, content creators, and infrastructure providers must weigh whether their platforms are indirectly accessible by users in the UAE.

In many cases, avoiding legal exposure may require disabling access or halting service altogether.

Dubai’s free zones no longer shield crypto services

Over recent years, the UAE has positioned itself as a hub for blockchain innovation.

Jurisdictions such as Dubai’s Virtual Assets Regulatory Authority (VARA) and Abu Dhabi Global Market (ADGM) attracted global attention with purpose-built crypto licensing frameworks.

However, the new federal law overrides these free-zone arrangements, asserting Central Bank control nationwide.

Federal law supersedes any rules introduced by the UAE’s free zones, effectively dissolving the regulatory arbitrage that once drew companies to Dubai.

The broader context includes the country’s history of digital restrictions.

For instance, WhatsApp voice calls remain blocked across the UAE, reinforcing a consistent policy approach to centralised control over communications and digital tools.

While this may bring the UAE in closer alignment with international pressure from groups like the Financial Action Task Force, it also puts crypto service providers in a difficult position.

In other jurisdictions facing similar pressure, firms have withdrawn entirely to avoid enforcement risk.

Enforcement begins in 2026, with further rules expected

Entities have a one-year window from 16 September 2025 to come into compliance. This grace period may be extended at the discretion of the Central Bank.

During this time, further regulations are expected to clarify how these broad rules will be applied in practice.

Despite this, the scope of the law is already causing concern.

The language around facilitation and communication, combined with the severe penalties under Article 170, suggests that firms offering crypto tools globally must now consider the risk of incidental exposure to UAE users.

For software developers and platform operators, this marks a significant departure from the norms of decentralised access and open-source innovation.

The post UAE makes Bitcoin wallets a crime risk in global tech crackdown appeared first on CoinJournal.

UAE makes Bitcoin wallets a crime risk in global tech crackdown

Source: https://coinjournal.net/news/uae-makes-bitcoin-wallets-a-crime-risk-in-global-tech-crackdown/