Square Auto-Enables Bitcoin for U.S. Merchants
1h ago|7 min readStandard
Fazen Markets Research
AI-Enhanced Analysis
Squarebitcoinpaymentsmerchant adoptionjack dorsey
Square has rolled out an update that auto-enables bitcoin payments for millions of U.S. businesses, converting received BTC into dollars by default, a move announced on Mar 30, 2026 (Coindesk). The change is presented as a friction-reduction measure for small merchants: customers can pay in bitcoin but the merchant receives U.S. dollars unless they opt-in to hold crypto. The policy, as reported by Coindesk, targets widespread distribution of crypto payment capability without exposing most sellers to price volatility or custody complexities (Coindesk, Mar 30, 2026). That dual-track approach — enabling consumer choice while defaulting to fiat settlement — recalibrates where crypto sits in the retail payments stack: consumer rails for payment versus merchant settlement preferences. For market participants, regulators, and analysts, the rollout raises immediate questions about demand elasticity for merchant-held bitcoin, tax reporting implications, and competitive responses from incumbents such as PayPal and newer entrants in the payments ecosystem.
Square's decision must be read against two concurrent dynamics: growing consumer interest in crypto as a payment medium and merchant-level risk aversion to holding digital assets. The Coindesk report (Mar 30, 2026) frames the change as an operational convenience for millions of U.S. businesses; the company emphasizes default conversion to dollars to avoid subjecting small sellers to intraday and long-term price swings. Historically, merchant acceptance has been a recurring barrier for crypto payments — while pockets of adoption exist, widespread merchant-held crypto exposure has been scant due to volatility, accounting complexity, and regulatory uncertainty.
At a macro level, the U.S. small-business universe remains large: the U.S. Small Business Administration reported roughly 33 million small businesses in recent years (SBA, 2024), which puts the "millions" referenced by Coindesk in perspective as a sizable but partial penetration of the market. Square's distribution advantages — hardware, seller relationships, and software services — give it an activation path that many crypto-native payments firms lack. Yet distribution alone does not guarantee economic uplift for crypto markets: the default-to-dollar flow explicitly decouples merchant settlement from underlying bitcoin accumulation.
The rollout also intersects with regulatory scrutiny. Since the 2021 reorganization when Square rebranded parent operations under Block, the corporate group has balanced investments in bitcoin infrastructure and mainstream financial products. The March 30, 2026 change follows longstanding regulatory conversations around custody, anti-money laundering (AML) obligations, and tax reporting for crypto transactions. In practice, default conversion simplifies bookkeeping for sellers, but it shifts compliance obligations and liquidity management requirements back to the platform.
Coindesk's report (Mar 30, 2026) provides two explicit data points: the update was publicly rolled out on that date and the description that it affects "millions" of U.S. businesses. The word "millions" is intentionally broad; Square has not published a precise merchant-count impacted by the default setting in that release, which leaves analysts to parse the rollout against Square/Block's publicly reported merchant metrics and install base. For context, Square's historically reported merchant relationships have ranged in the low millions in SEC filings prior to the Block rename, underscoring that this initiative is material in distribution terms even if the exact nexus of active adoption remains to be disclosed.
Operationally, the default conversion removes price exposure for merchants but not for the consumer: payers who choose bitcoin will still draw on on-chain or off-chain BTC liquidity, which Square converts at point-of-sale to fiat on behalf of the seller. That introduces three measurable vectors: settlement velocity (time between payment and fiat availability), conversion spread (basis between BTC market price and rate offered by Square), and counterparty custody risk (custodian and reserve backing fiat conversion). None of these figures were quantified in the initial Coindesk piece; they will be critical metrics to watch in subsequent merchant and regulatory disclosures.
Finally, in a comparative data sense, the change contrasts with firms that explicitly hold crypto on their balance sheets or offer merchants the option to receive crypto settlement — MicroStrategy's MSTR-led strategy and some crypto-focused PSPs remain exceptions. Square's default-to-fiat is functionally closer to the path taken by mainstream card networks and leading fintechs like PayPal, which have enabled crypto-related payment flows but limited merchant balance-sheet exposure. The divergence between "acceptance" and "retention" is central: acceptance may broaden quickly; retention will remain conditional on merchant risk appetite and regulatory clarity.
For the payments sector, Square's move reduces one friction in consumer-initiated crypto payments while preserving the merchant economics that many sellers prefer. If Square's default-to-dollar setting becomes widely accepted by its installed base, the near-term economic impact on bitcoin price formation is likely muted because the platform functions as an on-ramp with immediate fiat off-ramp rather than a newly durable source of bitcoin demand. This differentiates the rollout from narratives that merchant acceptance alone will create sustained BTC buy-and-hold demand.
Competitors will face strategic choices. Firms that enable merchants to opt to hold crypto will need to clarify custody arrangements and provide tax and accounting tools; firms that emulate Square's default approach will instead focus on volume and convenience. PayPal and Stripe — incumbents with large merchant footprints — may accelerate optionality in their own stacks, but they must weigh the same trade-offs between merchant retention risk and product complexity. For fintechs focused on crypto custody and yield, Square's path concentrates the consumer payment flow back into platforms that manage conversion and settlement, potentially lowering margins for pure-play custody providers unless they partner or white-label.
From an investor lens, Square's policy can alter revenue mix without fundamentally changing merchant economics at scale: revenue from payment processing, FX spreads on BTC-to-USD conversions, and ancillary services (reports, analytics, chargebacks) can increase even if merchants do not elect to hold bitcoin. That creates a distribution-based growth vector for the company that leverages existing hardware and software, but it does not equate to an immediate on-balance-sheet bitcoin accumulation strategy that some investors might have presumed given Jack Dorsey's vocal crypto advocacy.
There are four measurable risks that follow the rollout. First, regulatory risk: by acting as the conversion intermediary, Square may face intensified AML and reporting obligations; regulators could demand granular transaction-level disclosures, which introduce costs and potential enforcement exposures. Second, operational and market risk: the company will be exposed to execution risk on conversion spreads and liquidity management if volumes spike or market liquidity deteriorates during extreme volatility. Third, reputational risk: merchants who believe they are "accepting bitcoin" but are unaware of automatic fiat conversion could raise disputes or chargebacks, which increase customer service and legal costs. Fourth, competitive risk: if other platforms offer merchants more attractive economics (e.g., the option to receive and manage BTC with integrated tax tools), Square could see a two-tiered migration among more crypto-friendly merchants.
These risks are quantitatively manageable but require explicit disclosures that the initial Coindesk piece does not provide. Key metrics investors and regulators will seek include conversion spreads (bps), settlement times (minutes/hours), percentage of transactions converted vs. held, and the counterparty exposure limits on the platform's BTC float, if any. Without such transparency, market participants will need to infer scale effects from processing volume disclosures and subsequent merchant surveys.
Near term, the market reaction is likely to be muted: the rollout simplifies payment choice for consumers and preserves merchant neutrality by defaulting to fiat. Over a 12- to 24-month horizon, two scenarios are plausible. In one, default-to-fiat becomes the de facto standard and crypto remains primarily a consumer payment option with limited merchant-held accumulation, compressing the impact on BTC demand and keeping volatility-driven settlement flows inside payment platform economics. In the alternate scenario, a non-trivial cohort of larger or crypto-committed merchants opt to hold bitcoin, prompting platforms to offer custody-grade tools and spurring a modest but visible shift in merchant balance sheets.
Strategic outcomes will be shaped by measurable adoption rates, which Square is positioned to disclose in subsequent reporting. If adoption of consumer-initiated BTC payments grows by double digits year-over-year and a meaningful minority of merchants elect to receive BTC, the payments ecosystem would reprice service offerings and partnerships accordingly. For macro observers, the more critical indicator will be whether platform-level custody demand emerges — that is the differentiation between transient transactional flows and structural asset demand for bitcoin.
Fazen Capital's view is that Square's auto-enable policy is a pragmatic commercial solution rather than a transformational commitment to merchant-held bitcoin. The contrarian reading is that this rollout may reduce systemic BTC accumulation by redirecting what could have been merchant demand into platform-level conversion revenue. In other words, broader nominal acceptance could paradoxically reduce long-term market support for bitcoin prices if platforms consistently convert receipts to fiat instead of enabling durable custody. That dynamic favors firms focused on conversion economics and liquidity management over speculative narratives of immediate mass adoption driving BTC scarcity.
Moreover, we believe the long-term winners will be platforms that provide clear custody, tax, and accounting tooling that lower the effective cost of holding crypto for merchants. Square's decision to default to dollars solves a short-term merchant pain point but also creates an opening for competitors to differentiate on flexibility. Investors and corporate strategists should therefore watch conversion spreads, custody product roadmaps, and merchant opt-in rates as leading indicators of whether merchant-held crypto will scale.
For institutional clients evaluating payment-platform exposure, the critical question is not whether consumers can pay in bitcoin — they already can in multiple channels — but whether platforms translate those transactions into merchant-held assets or immediate fiat. The economics and regulatory costs are very different across those two states, and Square's move skews the balance toward fiat settlement in the near term.
Square's auto-enable of bitcoin payments for "millions" of U.S. merchants (Coindesk, Mar 30, 2026) increases consumer payment choice while preserving merchant fiat settlement, a design that supports transaction growth without necessarily increasing durable BTC demand. Watch conversion spreads, merchant opt-in rates to hold crypto, and regulatory disclosures as the primary metrics that will determine the economic and market impact.
Disclaimer: This article is for informational purposes only and does not constitute investment advice.
Q: Will merchants automatically hold bitcoin if they accept it through Square?
A: No. Square's default policy converts customer-paid bitcoin into dollars for merchants unless the merchant actively chooses otherwise; the initial Coindesk disclosure indicates default conversion by design (Coindesk, Mar 30, 2026). That preserves merchant exposure profiles and simplifies tax and accounting obligations at the cost of limiting direct merchant accumulation of BTC.
Q: How does this compare to competitors?
A: The policy is closer to incumbents that enable crypto-based payments with fiat settlement than to entities that intentionally accumulate crypto on their balance sheets (for example, MicroStrategy's strategy). Competitors that wish to attract crypto-native merchants may offer optional custody, tax tooling, and incentives that Square does not provide by default.
Q: What should analysts track next?
A: Key follow-ups include (1) Square/Block disclosures on the percentage of merchants that keep fiat vs. opt to receive BTC, (2) reported conversion spreads and settlement times, and (3) any regulatory guidance or enforcement actions clarifying AML/KYC expectations for payment platforms that intermediate crypto-to-fiat conversions. These metrics will determine whether the rollout meaningfully shifts BTC demand dynamics or primarily improves consumer convenience.
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