The relevant part is the legislation of the instance hosting location and the degree of anonymity of the instance owner and his attitude.
Hetzner is the very opposite of bulletproof hosting, the owner of lemmy.world is fully public and his attitude to potentially problematic content is on public record.
I don’t seem to be able to make myself understood. Once again: monitoring of (encrypted) connections is irrelevant. Or just getting the data from your own federating instance.
Consider an anonymously paid bulletproof hosted lemmy instance. The admin is unknown, the hosters are not responsive to takedown requests, jurisdiction is neutral or welcoming. I can think of multiple such controversial instances that have survived for decades. It’s the gold standard, but silver or even bronze is far better than a jumpy self-censoring guy hosting stuff at a severely problem-averse hoster like Hetzner.
If end users want to add protection layers to that it is their own prerogative and out of scope. EOT.