MIAMI, FLORIDA – JUNE 04: Jack Dorsey creator, co-founder, and Chairman of Twitter and co-founder & CEO of Square speaks on stage at the Bitcoin 2021 Convention, a crypto-currency conference held at the Mana Convention Center in Wynwood on June 04, 2021 in Miami, Florida. The crypto conference is expected to draw 50,000 people and runs from Friday, June 4 through June 6th. (Photo by Joe Raedle/Getty Images)
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The payment processor Square Inc., one of the companies tied to American technologist Jack Dorsey, just rolled out Square Bitcoin, a program that enables merchants to accept bitcoin payments. Over 4 million merchants use Square’s products, which means there are now up to 4 million new bitcoin point-of-sale locations to be enabled in the U.S. This is one of the most significant recent developments for bitcoin as a medium of exchange, a narrative long overshadowed by its role as a store of value, mainly powered by MicroStrategy’s adoption of BTC as a treasury asset and the wave of treasury allocations ignited since 2024.
This Is How Square Bitcoin works
Announced on October 8, the new product includes Bitcoin Payments and Bitcoin Conversions, allowing merchants to accept bitcoin with zero processing fees until 2027. According to Dorsey, since November 10 merchants can accept bitcoin and keep it, convert it to fiat, accept payments in fiat, or convert fiat to bitcoin. Square Bitcoin is available to all U.S.-based Square businesses, except those in New York. The program is open to all business types, but businesses must complete Square’s Know Your Business verification process.
“We’re doing this because bitcoin gives entrepreneurs a new lever: a way to spend and invest outside of traditional rails – with faster settlement, lower fees, and long-term potential. Until now, these tools have been out of reach for most small businesses. Square is changing that,” Bitcoin Product Lead at Block, Inc., the parent company of Square, Miles Suster said in a blog post when the product was announced.
But why is this launch significant? For example, El Salvador made bitcoin legal tender in 2021 and rolled out a government powered bitcoin wallet and merchant adoption didn’t take-off, and before that there were plenty of payment processors that enabled bitcoin payments.
Well, this time is different, mainly because of the weight of Square’s merchants, the maturity of the network and the asset and the possibility to experience bitcoin as money. And from the merchant’s perspective it’s interesting as a merchant can accept BTC and not pay the 3% credit card fee that normally needs to cover.
Square Bitcoin Accelerates The Idea Of Bitcoin As Day-To-Day Money
Head of Business Development at Zaprite.com and author Parker Lewis explained it in a long form post on X. “If it were not technically possible or practically achievable to purchase real goods and services directly with bitcoin and instead, if you always needed to convert bitcoin to fiat to then buy your goods and services, bitcoin would almost definitionally be too centralized as a system to credibly remain censorship resistant or to credibly enforce the rules of the system that make it viable as a currency system (notably its fixed supply),” Lewis said.
With this announcement, Square has three key elements to make bitcoin day-to-day money: a great number of merchants, a solid rail to exchange bitcoin through the Lightning Network, and the support of a hyper-on-line and advocacy-focused community of users that are ready to prove the capabilities of bitcoin as money. This explains how just a few hours after the activation, several videos and photos of people using the new feature started to populate on X.
After Square Bitcoin, What Is Next For Bitcoin As Money?
Square Bitcoin is an important piece of the bitcoin adoption puzzle, but it still needs some legal clarity. For instance, in the U.S. this kind of transaction will require some tax exemptions that still need to be created.
“Seems like it’s past time for a reasonable ‘de minimus’ exemption… As a fellow coffee drinker, this only makes sense,” Senator Cynthia Lummis, a big Bitcoin and Digital Assets proponent, posted through her X personal account.
Since in the U.S. virtual currency is property and not currency, for federal tax purposes everyday spending creates capital gains/losses. The IRS Notice 2014-21 and subsequent guidance reaffirm this. So even buying a coffee with bitcoin is a taxable disposal of property, and the consumer must calculate and report any capital gain or loss on the bitcoin spent, which makes bitcoin commerce problematic.
With this new merchant adoption push enabled by Square Bitcoin, the possibility to have an exemption for a certain amount of USD paid in bitcoin is now on the table. This could ignite a new wave of usage of BTC as money, and maybe can influence a change in the actual definition of bitcoin as property. It’s a first solid step toward that direction.