The wording "scan your phone" misleads by implying that the photos are scanned because they are on your phone, when really the photos would be scanned because you sharing them with a third party, by the third party. Yes it was all-or-nothing, what it wasn't is all-.

(Yes it was feasible to design the ability to have a local photo store which isn't uploaded to iCloud, separate from other photos which are, and call it "private photos", but that's another matter).