Square’s Cash App now lets users transact in bitcoin without paying fees

Square announced this week that users of Cash App, its peer-to-peer payments platform, can now send and receive bitcoin without paying any transaction fees. The company previously charged a variable fee on transactions that could go as high as 1.76 percent.

The company still charges fees in some areas, such as if users want to send money using a credit card.

Bitcoin was first introduced to Cash App in 2018, but growth in usage has tracked with the growth of bitcoin as a whole. In a recent earning’s call, Square said that it saw three million people make bitcoin transactions through Cash App in 2020, and nearly one million people made their first bitcoin transactions in January 2021.

Business model — Because of the way bitcoin’s underlying technology works, the average fee to send or receive currently sits at around $24. High fees occur when the blockchain is experiencing heavy loads, as users need to pay miners — people running farms of servers — to process transactions and update the ledger.

Square is able to offer zero fees to users in part because it operates as its own exchange. The company sells bitcoin at a slightly higher price than it pays, taking a small margin on each sale. For instance, one user of Cash App might sell their bitcoin to Square for $100, and then the company sells that cryptocurrency back to another user for $110. These transactions stay on Square’s internal ledger indicating which users own what, meaning it doesn’t have to send them back to the blockchain for processing.

Square has been leaning heavily into bitcoin on the back of soaring demand for cryptocurrencies. It most recently bought $170 million worth of bitcoin back in February, bringing its total ownership to around 8,027 bitcoins (worth around $473 million).

Digital gold — Bitcoin remains a small part of Square’s business — making up only 5 percent of profits — but CEO Jack Dorsey is a big proponent, once predicting that the cryptocurrency could eventually become the “single currency” that runs the internet because of its borderless nature, not being controlled by any central authority.

Others view bitcoin less as a currency than as new store of wealth more accessible to everyday Americans than the stock market, which Square says is part of its motivations in offering cryptocurrency purchases. “We feel that bitcoin is aligned with our purpose, which is economic empowerment,” said Square CFO Amrita Ahuja in a recent call with investors. “Economic empowerment is about bringing access to financial tools more broadly, including to people who haven’t had it before. We think bitcoin is a way that could enable that for the future.”

Aligning itself behind bitcoin has also helped boost Cash App’s brand, which is popular among young adults who may just be starting out on their financial journeys. Alongside the elimination of bitcoin fees, Cash App announced a $1 million giveaway in bitcoin, open to any U.S. residents over the age of 18. The app, which was once a side project beside Square’s main business making point-of-sale products for businesses, now has more than 30 million monthly users.