Japan's Financial Services Agency issued a warning Friday to major cryptocurrency exchange Binance for operating without registration in the country.
Hong Kong-based Binance was operating in Japan through the internet without a license for a virtual currency exchange, according to a Google translation of the Japanese-language statement.
Bitcoin traded 3.4 percent lower near $8,417, according to CoinDesk at 10:20 a.m. ET.
Japanese authorities recognized bitcoin as legal tender last April and require cryptocurrency exchanges to register with the government. Sixteen exchanges have done so, March 7, the Japanese Financial Services Agency said.
Binance CEO Changpeng Zhao confirmed receipt of the warning, tweeting: "Our lawyers called JFSA immediately, and will find a solution."
It was not clear whether Binance was still operating in Japan, and Zhao did not respond to a CNBC request for comment. Zhao said in a Bloomberg report that the company tried to get a license in Japan but has decided to remove its staff from its office.
Bitcoin one-week performance
Reuters reported Thursday, citing a source familiar with the matter, that if Binance does not heed the warning, the agency will file a criminal complaint. The agency would not confirm that part of the report in an email to CNBC.
Japan has become one of the largest markets in the world for cryptocurrencies. Trading in bitcoin-Japanese yen accounted for about 57.6 percent of total bitcoin trading volume, according to CryptoCompare.