Square’s Lightning Integration May Encourage Bitcoin Payments After First Transaction at Compass Coffee

• Square completed its first Lightning payment at Compass Coffee, demonstrating instant BTC settlement on standard Square registers.

• Merchants can accept Bitcoin, convert up to 50% of daily revenue into BTC, and receive zero processing fees for the first year.

• Square aims to reach four million U.S. retailers by 2026, positioning Bitcoin for everyday commerce and lower transaction costs versus card fees.

Square Bitcoin payments via Lightning Network: instant, low-fee BTC acceptance for merchants—learn how to enable it and start accepting BTC today with COINOTAG coverage.

Square processed its first Bitcoin payment via Lightning Network at Compass Coffee, launching fee-free BTC transactions for U.S. retailers.

Published: October 15, 2025 — Updated: October 17, 2025
Author/Organization: COINOTAG

How does Square’s Bitcoin payment via the Lightning Network work?

Square Bitcoin payments via Lightning Network route Bitcoin transactions through the Lightning layer to enable near-instant settlement and significantly lower fees compared with on-chain transfers. Square’s point-of-sale support lets merchants accept BTC at existing registers, with options to convert a portion of revenue into Bitcoin automatically.

How did the Compass Coffee demonstration prove Square’s Lightning integration?

During DC Fintech Week, Compass Coffee in Washington, D.C., processed the first public Bitcoin payment using a standard Square terminal. Compass Coffee reported successful payments from ten different wallets with instant settlement. Block’s Head of Bitcoin Product, Miles Suter, described the launch as a step to make Bitcoin “as seamless as card payments.” The live demo showed compatibility with a wide range of Lightning-enabled wallets and no new hardware required.

Square’s rollout: merchant incentives, reach and cost comparisons

Square will allow participating merchants to accept Bitcoin and convert up to 50% of daily revenue into BTC, a configurable option that gives businesses partial exposure to Bitcoin without operating a full crypto custody solution. To accelerate adoption, Square has announced a waiver of processing fees for the first year for merchants using its Bitcoin checkout.

By comparison, typical card processing fees for small merchants range between 1.5% and 3.5% per transaction. Lightning Network settlement fees are generally a fraction of those costs, and instant finality helps fit crypto payments into standard retail workflows. Square has indicated plans to expand access across its ecosystem—which includes Cash App, Bitkey, Proto and Spiral—with a target of reaching four million U.S. retailers by 2026.

Operational and regulatory considerations for merchants

Merchants must weigh operational changes, accounting treatments and any applicable tax reporting obligations when accepting Bitcoin. Square’s implementation is designed to integrate with existing point-of-sale operations and to simplify reconciliation. The company is coordinating with payment partners and regulators where necessary; however, availability may vary by jurisdiction and pending local approvals.

Compass Coffee CEO Michael Haft confirmed that payments from ten different wallets were processed successfully and without delay. The launch, organized during DC Fintech Week, represents Square’s first public use of its new Bitcoin checkout system developed by Block. Square’s communications note that the Lightning integration settles payments at near-instant speed and is compatible with existing Square white terminals.

Independent industry voices also weighed in. Pranav Agarwal, independent director at Jetking Infotrain, commented that the Lightning Network reduces Bitcoin’s typical 10-minute block confirmation time to near-instant settlement, enabling real-time commerce use cases for merchants. Block’s stated ambition—reaching four million U.S. retailers by 2026—would substantially increase Bitcoin’s utility as a medium of exchange if achieved.

Frequently Asked Questions

Can small merchants enable Square Bitcoin payments and still receive fiat?

Yes. Square’s configuration allows merchants to accept BTC and convert a set percentage of daily receipts into fiat automatically, or convert up to 50% into Bitcoin according to Square’s announced options. This preserves cash flow while offering BTC exposure.

How fast are Lightning Network payments when processed through Square?

Lightning Network payments settle near-instantly—typically within seconds—when processed through Square’s integration, as demonstrated in the Compass Coffee trial with multiple wallets completing transactions without observable delay.

Key Takeaways

• Live demonstration: Compass Coffee processed the first Square Lightning BTC payment, proving compatibility with standard Square hardware.
• Merchant incentives: Square waives processing fees for one year and supports converting up to 50% of daily revenue to Bitcoin.
• Scale and impact: Square aims to reach four million U.S. retailers by 2026, potentially lowering transaction costs and expanding Bitcoin’s role in everyday commerce.

Conclusion

Square’s Lightning Network rollout marks a practical move toward mainstream Bitcoin acceptance. By enabling Square Bitcoin payments via Lightning Network on existing terminals, offering fee relief for the first year, and permitting partial BTC conversion of merchant revenues, Square and Block are removing technical and cost barriers for retailers. Continued rollout and regulatory clarity will determine adoption speed; merchants should evaluate integration, accounting and tax implications as they consider enabling BTC acceptance. For ongoing updates and implementation guidance, follow COINOTAG’s coverage.