U.S. Government Restrictions on WeChat Application: a Review of the Digital Payments Market

The judicial decision decided to suspend the presidential order, understanding that there would be a risk of eliminating the communication platform with irreparable damage to the community's freedom of expression

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Ericson Scorsim. Lawyer and Consultant in Communication Law. Ph.D. in Law from the University of São Paulo (USP). Author of the Communications Law Collection.

 

The U.S. government has banned the WeChat application in the United States through a presidential order (Executive Order on Addressing the Threat Posed by WeChat).

According to the U.S. government, as the application belongs to a Chinese company, it is a threat to national security, foreign policy, and the United States’ economy.

The basis for this decision Executive Order 13.873 of May 15, 2019, on securing the information and communications technology and services supply chain, as well as the law that granted emergency economic powers to the President.

The application has messaging, social media, and electronic payment functions. It is also claimed that the application captures the personal data of Americans. The presidential decision clearly denies freedom of trade on the grounds of protection of national security.

As for the size of the WeChat platform’s communications, a U.S Court granted an injunction to ensure freedom of expression through the application.[1]However, one of the aspects to be examined relates to the issue of the digital payments market. WeChat is a powerful digital payment application owned by the Chinese company Tencent Holdings Ltd. There are millions of users of this mobile all around the world. Thus, the presidential decision holds a hidden issue related to market competition. By restricting WeChat, what the  U.S. government is in fact doing is protecting U.S. companies in the digital payments market:  Big Techs and credit card companies.  One of the potential competitors in the digital payments market for WeChat is WhatsApp, a Facebook application. The digital payments market moves billions of dollars globally. Also, digital payments are essential for e-commerce.

On this, Facebook recently announced its intention to create a digital currency called Libra, even creating a business association to promote the project. The leading U.S. credit card companies initially decided to participate in the project. Later, they chose to disconnect themselves from the program. Central Banks of several countries are reacting to Big Tech’s initiative in the financial sector. Central Banks perceive the systemic risk when Big Techs enter the financial market, which may disrupt global financial institutions.

One of the reactions to this global movement was the creation of the digital payment system called PIX. It is a digital payment system, organized through a software network that makes financial compensations between the participating economic agents (payer, recipient, and intermediary).

There are numerous advantages in PIX: the time of payments (payments can be made any day, any time, regardless of weekends, holidays, nighttime), reduction of transfer costs, reduction of the risks inherent to cash transfers, among others. The Brazilian Central Bank regulates the subject of PIX. Possibly, this system will produce other innovations in the financial market.  There are challenges, risks, and opportunities with PIX. In short, the U.S. government is applying restrictions to freedom of trade, on the supposed grounds of national security.

In reality, it ends up protecting its Big Techs from the competitiveness of Chinese companies. The international community must discuss this issue of global free trade, e-commerce, and digital payments to avoid abusive government practices.  It must be noted that PIX is a first step in democratizing access to the financial market, as well as in financial inclusion.

 

 

[1]Scorsim, Ericson. United States Courts guarantee freedom of expression through the WeChat application. Portal: www.direitodacomunicacao. September 25, 2020

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