UPDATE (16th June 16:00 BST): Following the publication of this article, a spokesperson for the New York State Department of Financial Services told CoinDesk “miners and mining pools are exempt from the BitLicense”.
In its announcement, posted to Bitcoin Talk, owner Eleuthria cited the finalization of the BitLicense as a primary motivator for shutting down, stating that BTC Guild could not afford any legal threats that may arise as a result of the New York regulatory framework.
The pool announced last October that it was considering closure in the face of falling revenue and rising risks for both users and the pool itself. BTC Guild first floated the idea in July 2014, citing the then-incomplete BitLicense at the time.
Eleuthria noted that whether BTC Guild is based in New York “does not matter” and suggested that the pool could face significant legal liability regardless of its location because “the final regulations have enough gray area that BTC Guild is at risk”.
The post explained:
“This fact makes it possible for New York to attempt to claim jurisdiction to enforce regulations. Whether or not BTC Guild could win in defense of such an attempt is irrelevant, since the cost of defending the pool would be greater than any income the pool is expected to generate going forward.”
BTC Guild will cease operating after 30th June, with withdrawals available until 30th September.
The mining pool – a collective of miners who share their hashing power to compete for blocks as a group – has reduced its minimum withdrawal amount to 0.0001 BTC, with no transaction fees required to remove money from the platform.
BitLicense, fraud risk blamed
In addition to the BitLicense finalization, the gradual decline in size of the pool relative to its costs and liabilities was cited as a factor in the closure decision.
“As mining has become more centralized, BTC Guild has continuously shrunk in proportion to the network, now being less than 3% of the network hash rate. The costs of running the pool have not changed, and the amount of funds at risk in the event of a compromise is significantly higher than what the pool could ever recover from.”
The announcement pointed to the growing risk of fraud BTC Guild allegedly faces, with Eleuthria stating that “I have been growing concerned for some time now about attempts to defraud pools.”
“When the pool was 20-30% of the network, the amount of funds at risk was slightly higher, but the ability for the pool to recover from that loss was present,” Eleuthria wrote. “At 3% of the network, the pool would not be able to recover from such a loss.”
In its last announcement, BTC Guild floated the possibility of a sale in order to continue operating. According to the latest post, any idea of a sale was abandoned due to the perceived risk of fraud, as well as “personal attachment” to the pool on the part of its staff.
“The risk of users being cheated or stolen from as a result of transferring pool ownership is not something I am willing to accept,” Eleuthria wrote, reiterating that the decision to shut down is in part an effort to protect users from fraud.
Eleuthria went on to thank the community for its support of BTC Guild, which began operating in 2011, writing:
“Thank you to all the users and the Bitcoin community for making BTC Guild a success for the last four years. It has been hard to finally make this call a second time with the determination to not reverse the decision.”
Closed shop sign image via Shutterstock