Brazil Bill Would Block Government Use of CBDC for Surveillance

Brazil's Economic Development Committee approved a bill that would restrict the government's authority over a future central bank digital currency. The legislation targets the Central Bank of Brazil and other financial institutions linked to the drex CBDC.

The bill, based on Bill 4212/25 and modified by rapporteur Lafayette de Andrada, originally came from Deputy Bia Kicis. Under the text, a digital currency issued by the central bank cannot substitute for paper money. It cannot be forced as legal tender. The state cannot use it for political or ideological surveillance.

The fifth article requires governing bodies to ensure the digital currency does not cause financial exclusion. Alternatives must remain accessible to people without digital access, the bill says.

Kicis wrote that official digital currencies can bring benefits. They also raise concerns about privacy and individual freedom. International experience shows these tools can be used for mass surveillance and transaction monitoring, she said.

The drex project, Brazil's CBDC initiative, has been in development for several years. The central bank launched a pilot in 2023 to test privacy and programmability features. Privacy concerns led the central bank to scale back the project's scope last year.

The bill arrives as the central bank reassesses what the drex will cover. Some companies, including Microsoft (MSFT) and EY, have cut the number of employees working on drex-related solutions, local media reported. The reduction suggests private sector caution about the project's direction.

If passed, the bill would create a legal barrier against using the CBDC as a surveillance tool or cash replacement. That would reduce the risk of financial exclusion and government overreach, supporters argue. If the bill stalls or fails, the central bank would have wider discretion in designing the drex, and privacy protections would rest solely on central bank policy.

The Brazilian effort mirrors other legislative pushes, including a U.S. bill aiming to provide crypto clarity by July 4.

The legislation still needs approval from both chambers and presidential sanction. No date has been set for a floor vote. The central bank has not commented on the bill.