This is a full hallucination from ChatGPT.

There is no way to currently set a community to Private. The way to access settings is via a pencil icon, not a gear.

There is currently an option to limit visibility to the local instance, but that prevents anyone from another instance to participate, and does automatically grants full access to any local user.

What is possible is to only allow mods to post, but even that doesn’t limit comments, and would require every member to be a mod.