How to Cash Out Bitcoin Sales Through Square: A Practical Guide for Merchants

Square's Bitcoin Payments feature, launched in November 2025, represents a genuine shift in how small businesses can handle cryptocurrency. Over 4 million U.S. merchants can now accept Bitcoin at their point-of-sale systems with zero processing fees through 2026—a sharp contrast to the 2.5-3.5% that credit card companies typically extract from every transaction.

But accepting Bitcoin is only half the equation. Most merchants need to convert those digital assets into dollars they can actually use. Here's how the cash-out process works, what it costs, and what you should consider before diving in.

How Bitcoin Payments Work on Square

When a customer pays with Bitcoin through Square, the transaction settles almost instantly via the Lightning Network. The funds appear in your Square Dashboard within seconds—no waiting days for payment processing like with traditional card networks.

There are limits to know about. Individual Bitcoin transactions cap at $600 equivalent, and your daily maximum is $20,000. For larger purchases, you'll need to accept alternative payment methods.

One critical detail: Bitcoin payments cannot be reversed. If a customer needs a refund, you can only issue it as a Square gift card. This is fundamentally different from credit cards, where chargebacks are a fact of life. Whether that's a feature or a bug depends on your business.

Cashing Out: Your Options and Costs

Once you've accumulated Bitcoin from sales, Square offers three withdrawal speeds to move funds to an external wallet:

Standard withdrawals are free but take longer to process. Rush withdrawals cost $2-3 plus network fees and complete within about 2 hours. Priority withdrawals also run $2-3 plus fees but finish in roughly 20 minutes.

From an external wallet, you can then sell Bitcoin for dollars through various exchanges, though that introduces additional steps and potential fees.

The Conversion Alternative

Square also offers Bitcoin Conversions, a feature available since October 2025 that works differently. Rather than accepting Bitcoin directly, this tool automatically converts up to 50% of your daily credit card sales into Bitcoin.

You set the percentage in 1% increments, from 1-50%. It's essentially dollar-cost averaging into Bitcoin using your business revenue—useful if you want Bitcoin exposure without requiring customers to pay in crypto.

This feature isn't available to New York State businesses due to regulatory constraints, a reminder that crypto rules remain a patchwork.

The Tax Complexity

Here's where things get genuinely complicated. Starting in 2026, the IRS requires Form 1099-DA for digital asset sales, including full cost-basis reporting for all transactions.

Bitcoin transactions on Square aren't subject to IRS withholding at the time of sale. That means you're responsible for tracking and paying capital gains taxes yourself. If Bitcoin's price rises between when you receive it and when you sell, you'll owe taxes on that gain. If it falls, you may have a deductible loss.

This is real accounting work. For a business processing frequent Bitcoin transactions, the record-keeping burden is substantial.

The Bigger Picture

Bitcoin merchant adoption surged 53% in 2025, with nearly 20,000 merchants now accepting it. Block (Square's parent company) is clearly betting big—they hold 8,780 BTC on their own balance sheet, and Bitcoin-related revenue hit $1.97 billion in Q3 2025.

But context matters. Fewer than 10% of U.S. retailers currently support crypto payments, and most implementations remain pilots. PayPal and Stripe are entering this space too (Stripe announced a Crypto.com partnership in January 2026), suggesting increased competition ahead.

The zero-fee period through 2026 is a promotional offer. Starting in 2027, Square will charge 1% per Bitcoin transaction—still cheaper than credit cards, but no longer free.

Should You Accept Bitcoin?

The honest answer depends on your specific situation.

It makes sense if: Your customers actually want to pay in Bitcoin, you're comfortable with the tax complexity, and you value the irreversibility of transactions (no chargebacks).

It's probably not worth it if: You're hoping to attract crypto-paying customers who don't currently exist in your market, you lack bandwidth for additional accounting, or you're in a business where refunds are common.

Two-step verification is mandatory for Bitcoin features on Square, so factor in that security setup as well.

The infrastructure is finally becoming practical for everyday merchants. Whether that infrastructure solves a real problem for your business is a question only you can answer. The zero-fee window through 2026 at least gives you room to experiment without immediate cost—though the tax reporting requirements mean "free" isn't quite free in terms of administrative burden.