The Facebook-owned messaging service rolled out the new feature in the South American country last week, but Brazil's Central Bank has since had it shut down.
In a statement, they insisted that they wanted to "preserve an adequate competitive environment" in the mobile payments sector and ensure the "functioning of a payment system that's interchangeable, fast, secure, transparent, open and cheap."
According to TechCrunch, the bank has told Mastercard and Visa to stop money transfer on WhatsApp, and failure to comply will lead to fines.
WhatsApp Payments was launched to offer users the ability to send money to their contacts or local businesses within a chat, with the payment being uploaded like a photo or video.
Matt Idema, chief operating officer of WhatsApp, had said it would be particularly helpful during lockdown.
He commented: "WhatsApp is heavily used there, both by people and small businesses.
"We think we can help grow digital payments, help grow the digital economy with small businesses, and help support financial inclusion.
"We can't have the kind of interactions with each other that we normally would, if you want to lend someone cash or if you want to buy something from a local business."
The system used Facebook Pay and was free of charge, however businesses had to pay a fee for receiving payments.