Client-generated IDs are necessary for distributed or offline-first systems. My company, Vori, builds a POS for grocery stores. The POS generates UUIDv7 IDs for all data it creates and that data is eventually synced to our backend. The sync time can range from less than 1 second for a store with fast Internet to hours if a store is offline.

Is a collision possible? Yes, but the likelihood of a collision is so low that it's not worth agonizing over (although I did when I was designing the system).