A collateral currency is a currency that can be used as "collateral" for trading using margin.
The collateral currency you hold does not have to match the trading pair of the order book on which you plan to trade using margin. This is possible because when you open a position by purchasing or selling cryptocurrency on margin, Kraken’s own funds are used to extend margin to you for the full amount of that purchase or sale.
The collateral currencies on Kraken are:
* For Tether (USDT) there is a 10% haircut, meaning for collateral currency purposes 1 USDT counts for 0.9 USDT towards your trade balance.
** For Tezos (XTZ), and TRON (TRX) there is a 50% haircut, meaning for collateral currency purposes 1 XTZ only counts for 0.5 XTZ towards your trade balance.
Note: As of the September 27th, 2018 trading engine update, collateral currencies used to open a spot position on margin can not be exchanged for other currencies or withdrawn while the spot position on margin is open.
The collateral currencies available for futures trading are different. All of the futures pair currencies - XBT, ETH, LTC, BCH and XRP - are available as collateral currencies and are individualized per instrument on Kraken Futures.