This seems worded to get a Yes answer. So, yes.
It's a big deal because it's unprecedented (to my knowledge) outside of the domain of malware*. Other cloud providers run checks of their own property, on their own property. This runs a check of your property, on your property. That's why people care now. The fact that this occurs because of an intention to upload to their server doesn't really change the problem, not unless you're only looking at this like an architectural diagram. Which I fear many people are.
A techie might look at this and see a simple architectural choice. Client-side code instead of server-side. Ok, neat. A more sophisticated techie might see a master plan to pave the way for E2EE. A net-win for privacy. Cool. But the problem doesn't go away. My phone, in my pocket, is now checking itself for evidence of a heinous crime.
*I hope the comparison isn't too extra. I was thinking, the idea of code running on my device, that I don't want to run, that can gather criminal evidence against me, and report it over the internet... yeah I can't get around it, that really reminds me of malware. Not from society's perspective. From society's perspective maybe it's verygoodware. But from the traditional user's perspective, code that runs on your device, that hurts you, is at least vigilante malware, even if you are terrible.