A collateral currency is a currency that can be used 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.
Unstaked assets can be used as collateral for margin trading. Kraken Rewards assets (staked automatically) are eligible as collateral, while Kraken Pro Flexible Staking and Pro Bonded Staking assets are not eligible.