Theoretically, any client can censor anything they want, that goes for Fedi too.

This particular formula, depending on how many followers you require accounts to have (it’s configurable) can inadvertently hide new accounts from the TL, but my understanding is that they’re still visible in conversations, so it’s no great loss. Since not everyone will be using it, they’ll naturally accrue followers with time and won’t be caught in the filter anymore.