I suppose that’s how it would be set.
SME (Neth’s ancestor) acts as its own DNS resolver, and provides DNS to its LAN clients. It resolves DNS queries by directly querying the authoritative DNS servers for the domains in question, caching the results according to their TTL. It doesn’t use your ISP’s DNS servers, or Google’s, or 126.96.36.199, or 188.8.131.52, or… It’s smart enough to not need them. This should be a recipe for robust DNS resolution (as you’re asking the servers who are in the best position to give accurate answers), and it should also avoid the privacy concerns that resulted in OP’s question (because your DNS queries aren’t going through a single point of logging).
This has been SME’s behavior since before it was SME, but Neth has changed it. I assume the change was deliberate, but wonder why the change was made. Edit: FWIW, pfSense also works this way.