[nfoz]

I definitely agree that your wording change is a big improvement.

Why can't Riot "check my address book to find other Matrix users" without sharing it to their server? Could the client make a one-way hash for each contact and send those to the server to compare against hashes of other contacts?

So in your wording, it's not clear that B (agree to sharing my whole address book) follows from A (Riot wants to check my address book for a purpose). Actually it's not clear if "agree to sharing your address book" means sharing it with the client app, or sharing it with a remote server that someone else controls.