Digital payments firm Square has won a patent for a payment network that allows merchants to accept payments in any currency, including bitcoin or another cryptocurrency.
Public documents published on Aug. 21 show that the U.S. Patent & Trademark Office (USPTO) has approved Square’s application to patent a system that allows merchants to accept cryptocurrencies alongside conventional payment methods and cash out in their currency of choice. The San Francisco-based firm first filed for the patent in Sept. 2017.
From the patent:
“The disclosed technology addresses the need in the art for a payment service capable of accepting a greater diversity of currencies…including virtual currencies including cryptocurrencies (bitcoin, ether, etc.)…than a traditional payment system in a transaction between a customer and a merchant, and specifically for a payment service to solve or ameliorate problems germane to transactions with such currencies. Specifically, the payment service described herein can facilitate real-time (or substantially real-time) transactions, allowing a customer to pay in any currency of their choice, while the merchant can receive payment in a currency of their choice.”
Square would not be the first payment processor to allow merchants to accept payments in cryptocurrency that are automatically converted into local currency. BitPay, for instance, has been processing bitcoin payments since 2011.
However, Square already has tremendous market penetration, so adding cryptocurrency payments to its present POS system would allow millions of merchants to accept bitcoin without having to onboard to another payment processor or manually convert cryptocurrency funds into fiat.
Notably, the patent also details a process that allows the POS system eliminate latency in cryptocurrency transactions, ensuring that even bitcoin transactions (often criticized for their slower confirmation times) can be approved at roughly the same speed as a credit card transaction.
The payment service will accomplish this by maintaining a private blockchain that records transactions from Square-managed wallets in real-time, allowing the POS system to identify the changed balances before the transactions are written to the public blockchain. According to the patent, this does not completely eliminate the risk of double spend attacks, but it transfers that risk from the merchant to the payment service.
The patent also notes that transaction latency could be eliminated by having user funds custodied by the payment network itself, allowing Square to simply update its internal ledger rather than writing any transactions to the blockchain.
Of course, there’s no guarantee that Square will actually implement its patented cryptocurrency payment network into its POS service. Bank of America, for instance, has applied for dozens of blockchain patents, which a former VP who ultimately left the bank to found a cryptocurrency startup said are “meaningless” public relations plays.
However, Square, unlike many firms that have toyed with blockchain research, is run by a vocal cryptocurrency proponent.
As CCN.com reported, Square CEO Jack Dorsey is on record stating that he believes bitcoin could be the internet’s native currency within a decade.
“The internet deserves a native currency. It will have a native currency. I don’t know if it will be Bitcoin or not,” he said during an interview in May. “I hope it will be bitcoin.”
Dorsey also said in a recent earnings call that Square’s interest in bitcoin extends beyond just buying and selling, noting that the firm sees cryptocurrency as a “transformational technology.”
Moreover, the patent itself includes reference drawings that appear to show bitcoin payments being executed through the Square’s peer-to-peer Cash App, through which the firm began offering bitcoin trading in late 2017 and early 2018.
Trading volumes on the app have thus far been minor compared to the global spot market, but Square CFO Sarah Friar said recently that the company has seen “real growth” in its bitcoin user base.
Read the full patent below:
Featured Image from Shutterstock
Last modified: June 10, 2020 1:42 PM UTC