I've never had it replace local files. I would say you should back up your music collection like anything else in case something happens, but as long as the files are there locally I see no reason why it would replace them.
Maybe it wants to "move" everything to your local library and messes it up / puts it into some idiotic inaccessible format like Photos. Then you can "export" them as "raw" which takes hours and will crash / just stop a bit of the way in. I've had bad luck with the photos app with just ~10k photos. I still miss Aperture.
