Certain features require setting up Office 365 groups for being able to utilize these with external guests. And example of this is when using Azure Information Protection for encrypting email content, you are required to select the group that has permission to open the content. The only way that works is to utilize an Office 365 Group, as even mail enabled security groups do not work for this.

In these situations, when you add a guest user and they accept the invite, they are able to see the other members of the group. This is a GDPR concern as it displays things that GDP classes as PII (the email address) and can cause issues.

Per: https://techcommunity.microsoft.com/t5/Office-365-Groups/Hide-Groups-membership-not-working-available/td-p/44515 this had a roadmap entry last year, but no longer is listed and also not implemented.