FYI - This is the privacy policy for it: https://www.facebook.com/ads/manage/customaudiences/tos.php

"Facebook’s custom audience feature enables you to create an audience using your data such as email addresses and phone numbers. When using Facebook’s custom audience feature, your data is locally hashed on your system before you upload and pass such data to Facebook to be used to create your custom audience (the “Hashed Data”)."