The inclusion of a timestamp in v7 makes collisions impossible unless the generating systems think that the time is the same down to the millisecond, which makes the temporal distance quite relevant.
The issue with UUIDv7 is that you also have significantly less entropy since you only have a 62 bits (sometimes less, depending on implementation) of "random" data. So while the time aspect of format lowers the chances of collisions, generating two UUIDv7's in the same millisecond (depending on implementation) have a significantly higher chance of collision than two UUIDv4's.
It's still incredibly unlikely, but it's also incredibly unlikely you generate two matching UUIDv4's, but it does happen.
TLDR; It's possible to generate matching UUIDv7's, don't assume otherwise.
But essentially, using UUID v7 you actually have less risk of collisions than with UUID v4.
Because of the birthday paradox, if you have N bits of randomness, you can expect a collision approximately after (2^((N/2)-1)) random numbers.
With v4, you have 122 bits of entropy over all time, so will see a collision after 2^60 allocations, approx 1.2 x 10^18.
With v7, you sacrifice 48 bits of entropy to give you 74 bits of entropy every millisecond, so you will see a collision after approximate 2^36 allocations per millisecond, approx 6.8 x 10^10 per millisecond.
You could argue that the risk of a collision is too high per millisecond because it's likely that 68 billion UUIDs are generated every millisecond. And maybe I'd agree. But the counter argument is that with v4 you'd expect a collision after 2^24 milliseconds, or 280 minutes, allocating at the same rate of 68 billion UUIDs per millisecond.
Obviously "all time" is longer than "280 minutes", so v7 is actually statistically less likely to cause collisions than v4, even though it seems counter-intuitive because it has a smaller space devoted to entropy. The key insight is that the time provides bits that are guaranteed to be unique, so only collisions within the same timestamp are significant, and every bit used to provide known-unique values is worth 2 bits of entropy.
Thanks for a more articulate answer!