A token that represents another asset one-to-one on a different chain or standard, such as WETH for ETH or WBTC for Bitcoin. Wrapping locks the original and mints the wrapped version.
The IRS has not said whether wrapping is a taxable exchange. The conservative view treats it as a swap; the more common practitioner view treats it as a non-taxable change in form because you hold the same economic asset. We document the position.
Unsettled. There is no IRS guidance; the position depends on whether you treat the wrapped token as the same property. Consistency across years matters more than which position you take.
Source: No IRS guidance as of September 2026
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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