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 (going “long” or “short”), 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update, collateral currencies used to open a spot position on margin can not be exchanged for other currencies or withdrawn while the spot position on margin is open.  This means that, although your digital assets  that are reserved as collateral currencies will show in your account balance, these assets will not be available to trade or withdraw. To see the amount available to trade or withdraw in any given asset, navigate to the Funding tab through your Kraken account, then click on “withdraw” next to the specific asset.

Kraken Futures

All of the futures pair currencies - BTC, ETH, LTC, BCH and XRP - are available as collateral currencies and are individualized per instrument on Kraken Futures. For inverse contracts the collateral is the base currency, and for vanilla contracts the collateral is in the quote currency. 

*Availability of margin trading services is subject to certain limitations and eligibility criteria.