Not Bluetooth, but you need(ed?) location permission to send/receive some broadcasts. I have a remote app that needs location permission to send a broadcast searching for TVs, so I have it set to “ask me every time” and imprecise location. (Which on iOS is about a whole city wide)

There’s a specific “local network” permission nowadays so maybe it was the older permission API because you can deduce location from MAC addresses?

You need location to scan for Bluetooth in app, because scanning for Bluetooth was how advertisers got your location. You don’t need this to interact with a Bluetooth device, the user can connect to it from the settings.

And if it's a Bluetooth Low Energy device that doesn't use connections?

Especially if it's BLE. Commercial sites are full of tags that advertise their MACs. Phone app reads this and use it to deduce where you are. You can try something similar yourself with WiFi using Google geolocation API.