Brazil’s Pix and the Geopolitics of Digital Payments

A smartphone screen in Sao Paulo, Brazil, on July 16, 2025, shows a banking app with options for PIX, which is an instant electronic payment and money transfer method developed by the Central Bank of Brazil. (Photo by Igor do Vale/Sipa USA via Reuters)

Jeff Alvares

This July, the United States Trade Representative (USTR) launched a Section 301 investigation into Brazil’s instant-payment system, Pix. The question on the table is whether Pix unfairly restricts US companies in one of the world’s fastest-growing digital markets. The move came just weeks after India’s UPI and Indonesia’s QRIS were highlighted in the USTR’s Foreign Trade Barriers report. Together, these actions signal the emergence of a new front in global economic tensions: the battle over who sets the rules for digital money.

At the heart of the dispute is a fundamental dilemma. How far should governments go in reshaping digital markets in the name of financial inclusion? And when does digital sovereignty become digital protectionism?

Brazil’s bold experiment

Pix is not just another payments app. It is the most ambitious state-led digital infrastructure project in the Western Hemisphere. Unlike traditional systems, where central banks operate behind the scenes and private firms build consumer-facing services, Brazil merged both functions. The Central Bank operates the settlement rails and also manages the payment scheme itself, setting the rules, branding, and network standards. It required banks and major payment institutions to join and mandated that services be offered free of charge to individuals and small businesses.

The results have been dramatic. In five years, Pix has reached about 90% of Brazilian adults and now handles more than half of all electronic payments in the country. For millions of previously excluded Brazilians, Pix was their first real entry point into the digital economy. In terms of financial inclusion, it is hard to overstate its success.

But that success came at a cost. By making participation mandatory and transactions free, the Central Bank effectively crowded out alternative payment networks. Formally, the infrastructure is open, but in practice Pix dominates the market so completely that private providers cannot build rival platforms. What looks like universal access from Brasília can look like market foreclosure from Washington.

From UnionPay to Pix

This is not the first time payments have sparked international disputes. In 2012, the United States successfully challenged China’s UnionPay card system at the World Trade Organization (WTO). The panel concluded that UnionPay’s exclusive rights to clear transactions in renminbi restricted market access and discriminated against foreign firms, violating China’s commitments under the General Agreement on Trade in Services (GATS).

But Pix is not UnionPay. UnionPay operated as a commercial monopoly; Pix functions as a public utility, explicitly designed to advance social goals. Brazil can argue that its disruptive effects have fallen mainly on domestic banks, not foreign companies. It can also point out that WTO commitments on electronic payments were drafted in the 1990s, long before real-time digital systems existed.

The comparison still matters. If Washington frames Pix as UnionPay 2.0, it could press for a new precedent at the WTO. But if Brazil successfully defends Pix as a public service, it will set the stage for a broader rethink of how trade law applies to state-built digital platforms.

A global wave of public platforms

Brazil is hardly alone in experimenting with state-led digital infrastructure. India’s UPI, Indonesia’s BI-FAST, the European Union’s (EU) TIPS, and even the US’s FedNow all reflect the same trend: governments are no longer content to leave digital payments entirely to private actors. For many policymakers, payments are too important to be left to the market. They are the plumbing of the digital economy, essential for resilience, sovereignty, and inclusion.

This trend worries Washington. The USTR’s Foreign Trade Barriers report reflects a fear that public platforms could become a convenient form of protectionism. Countries can promote inclusion at home while quietly excluding foreign firms from access. For the United States, where private card networks and tech firms dominate, this is not just a trade issue but a strategic one.

The search for balance

The real challenge is not to choose between inclusion and competition, but to design institutions that can accommodate both. India’s UPI — Unified Payments Interface — offers one possible model. The government provides the public rails, but the front-end is open to multiple private players. Google Pay, PhonePe, and Paytm all compete vigorously for hundreds of millions of users, ensuring both universal access and innovation.

Brazil could consider a similar “Pix 2.0.” A basic, free tier would preserve universal access, while an optional premium layer could allow banks and fintechs to compete with new services – credit, insurance, cross-border transfers, rewards. Such a two-tier model would acknowledge that payments are both a public utility and a competitive market. The state can guarantee access without monopolising innovation.

The geopolitical stakes

The Pix probe is about more than Brazil. It is about the future architecture of global finance. If public digital systems are deemed inherently anti-competitive, central banks may find themselves constrained in building inclusive platforms. If, on the other hand, any public initiative can be justified in the name of inclusion, the principle of open markets risks becoming meaningless.

This tension will only intensify as central banks move toward digital currencies. China’s e-CNY, the EU’s digital euro, and dozens of other projects will raise similar questions. How far can governments reshape digital markets without crossing into protectionism? What role should international trade law play in defining those boundaries?

The WTO is poorly equipped to answer these questions. Its rules were written for a pre-digital era and offer little guidance for state-run digital infrastructure. Without new agreements, unilateral enforcement risks fragmenting global finance into competing blocs – one more fracture in an already strained international order.

Conclusion

Pix began as an experiment in financial inclusion. It has become a flashpoint in the geopolitics of digital sovereignty. The US investigation may look like a narrow trade dispute, but it is in fact a test case for how the world governs digital infrastructure.

The real question is whether governments can negotiate new rules that reconcile inclusion, sovereignty, and competition – or whether the global financial system will fragment as each country builds its own walled garden of digital money.

Brazil’s experiment shows both the promise and peril of state-led innovation. The choices made in Brasília, Washington, and Geneva will echo far beyond payments. They will shape who controls the levers of economic power in the digital age.

Jeff Alvares is senior counsel to the Central Bank of Brazil, former counsel to the International Monetary Fund, and a former member of the Financial Stability Board secretariat. He is an expert in global financial law and regulation, focusing on banking, payments, and fintech regulation. He holds a master's degree from Harvard law School and a bachelor's from University of São Paulo.

Republished from Modern Diplomacy: https://moderndiplomacy.eu/2025/09/17/brazils-pix-and-the-geopolitics-of-digital-payments/