Encanto's villain is the concept of generational trauma and manifested by grandma. I believe she isn't evil, just traumatized and passing it on to the next generation unwittingly. Others believe her to be evil because real life people don't stop being who they are after a song number.
I think it's a really innovative villain because generational trauma is real and lots of people have to deal with it. It some times takes more than one generation to leave a vicious cycle.
Also, "We Don't Talk About Bruno" serves the role of a Villain Song in Encanto and roughly the place in the story where the Villain Song fits, but beautifully subverts expectations and illustrates the generational trauma as its consequences in gossip and hearsay in a rather strong way, while also being the kind of "banger" and preternatural earworm that a good Villain Song can be.
I think it's a really innovative villain because generational trauma is real and lots of people have to deal with it. It some times takes more than one generation to leave a vicious cycle.