Is Bybit regulated for derivatives trading?

Understanding Regulatory Frameworks for Crypto Derivatives

Cryptocurrency derivatives trading platforms operate within a complex and evolving regulatory environment. The regulatory status of such platforms often depends on the jurisdictions in which they offer services. For Bybit, a prominent player in the crypto derivatives market, its regulatory standing is not uniform across all regions. This means that while Bybit may be compliant in certain areas, it does not hold a global license to offer derivatives trading. Regulatory bodies like the U.S. Commodity Futures Trading Commission (CFTC), the European Securities and Markets Authority (ESMA), and others impose strict requirements on leverage, disclosure, and user protection when it comes to derivatives.

Many users confuse general registration or compliance with full regulatory approval. It's important to distinguish between operational compliance—such as adhering to KYC/AML protocols—and being fully licensed to offer leveraged financial instruments. In several jurisdictions, Bybit has adjusted its services to align with local laws, sometimes by restricting access altogether. For instance, Bybit does not serve users from the United States, reflecting its avoidance of direct oversight by U.S. financial regulators.

Bybit’s Approach to Jurisdictional Compliance

Bybit operates under a multi-jurisdictional model, tailoring its services based on regional regulations. In some countries, it registers with local financial authorities to provide limited services. For example, Bybit obtained a Virtual Asset Service Provider (VASP) license in Dubai through the Dubai Virtual Assets Regulatory Authority (VARA), allowing it to legally offer derivatives products to users in that region. This license permits Bybit to conduct spot and derivatives trading under defined conditions, including capital adequacy and cybersecurity standards.

Similarly, Bybit has pursued compliance in Singapore, where it registered with the Monetary Authority of Singapore (MAS) under the Payment Services Act. However, this registration allows only for spot trading; derivatives trading remains restricted for Singaporean residents due to MAS rules limiting retail access to crypto derivatives. These actions show that Bybit engages with regulators but selectively enables derivatives offerings only where permitted.

In Europe, Bybit complies with the Fifth Anti-Money Laundering Directive (5AMLD) and conducts identity verification for EU users. Despite these measures, it does not hold a MiFID II license, which would be required to officially offer leveraged derivatives to retail investors. As a result, EU users can access Bybit’s platform, but with reduced leverage limits compared to unregulated regions, reflecting a risk-mitigation strategy aligned with regional expectations.

Derivatives Offerings and Risk Disclosures on Bybit

Bybit offers a wide range of derivatives, including USDⓈ-M perpetual contracts, inverse futures, and options. These products support high leverage—up to 100x on certain pairs—which increases both profit potential and risk exposure. The platform emphasizes risk management tools such as liquidation price calculators, take-profit/stop-loss orders, and insurance funds designed to minimize auto-deleveraging events.

Transparency in operations includes publishing funding rates, mark prices, and open interest data in real time. These metrics help traders assess market sentiment and avoid manipulation. Additionally, Bybit maintains a Proof of Reserves system, allowing users to verify that customer assets are backed on-chain. While not a regulatory requirement, this feature enhances trust in the platform’s solvency.

Despite these safeguards, the absence of comprehensive regulatory oversight means that users do not benefit from investor protection schemes like those offered by traditional financial institutions. There is no guarantee of compensation in case of platform failure or fraud. Users must therefore rely on Bybit’s internal policies and security infrastructure rather than external regulatory enforcement.

How to Verify Bybit’s Regulatory Status as a User

To determine whether Bybit is regulated for derivatives trading in your region, follow these steps:

• Visit the official Bybit website and navigate to the Legal or Compliance section located in the footer.
• Check the list of supported countries and review any jurisdiction-specific disclaimers.
• Look for mentions of regulatory licenses, such as the VARA license in Dubai or registration with MAS in Singapore.
• Use third-party resources like the Financial Conduct Authority (FCA) warning list or the CFTC’s public advisories to confirm whether Bybit is authorized in regulated markets.
• Enable KYC verification on your Bybit account, as higher levels of verification may unlock region-specific features tied to compliance.

Users should also monitor IP-based restrictions. Attempting to access derivatives features from a prohibited country may result in account limitations. Bybit employs geolocation technology to enforce these boundaries, and bypassing them via VPN could lead to permanent suspension.

User Responsibilities When Trading Derivatives on Unregulated Platforms

Trading derivatives on platforms like Bybit requires heightened personal diligence. Since regulatory protections are limited, users must independently assess counterparty risk. This includes reviewing the platform’s terms of service, fee structure, and dispute resolution mechanisms before depositing funds.

Security practices are equally critical. Users should:

• Enable two-factor authentication (2FA) using an authenticator app, not SMS.
• Set up withdrawal whitelist addresses to prevent unauthorized transfers.
• Regularly audit their transaction history and API key permissions.
• Avoid sharing login credentials or seed phrases under any circumstance.

Furthermore, tax reporting obligations remain the user’s responsibility. Profits from crypto derivatives trading may be subject to capital gains or income tax depending on the country of residence. Maintaining accurate records of trades, funding payments, and withdrawals is essential for compliance with local tax authorities.

Frequently Asked Questions

Can I trade derivatives on Bybit if I live in the European Union?Yes, users in the European Union can access Bybit’s derivatives products. However, leverage is capped at 2x for retail customers in accordance with ESMA guidelines. Professional trader status may allow higher limits, subject to eligibility criteria such as portfolio size and trading experience.

Does Bybit have a license from any major financial regulator?Bybit holds a VASP license from Dubai’s VARA, which authorizes it to offer derivatives in that jurisdiction. It does not have licenses from major Western regulators like the SEC, CFTC, or FCA to offer crypto derivatives.

Why doesn’t Bybit operate in the United States?Bybit does not offer services to U.S. residents because it does not comply with CFTC regulations governing derivatives trading. Providing such services without authorization would violate U.S. commodity laws, leading to legal consequences.

Are my funds protected if Bybit shuts down?No formal insurance or compensation scheme covers user funds on Bybit. While the platform uses cold storage and a Safeguard Wallet for asset protection, there is no regulatory guarantee for fund recovery in the event of insolvency or hack.