It does and it doesn't in some key ways. Luckily we all have the option to register somewhere that aligns with our individual personal values (or selfhosting). However communities tend to grow on the large instances since the high user base gains automatic exposure via local and all' feeds. Meaning while we can choose who to trust our account with if the biggest communities are hosted elsewhere you're at the mercy of large instance admins either way.
IMO the local feed needs to die for this reason. A few big instances shouldn't be able to set the course for all of Lemmy by deciding what instances get community growth.