Wrapped token
Also known as: wrapped crypto, WBTC, WETH
A token that represents another asset on a different chain (e.g. WBTC for BTC); wrapping may be treated as a disposal depending on the facts.
Definition
A wrapped token is a tokenised representation of another asset, letting it be used on a chain where it does not natively exist — for example WBTC represents Bitcoin on Ethereum. Tax treatment of wrapping and unwrapping is unsettled: some view it as a like-for-like exchange and others as a disposal of one asset for another. Conservatively, treating wrapping as a disposal and tracking it is the safer record-keeping approach pending clearer guidance.
Example
You wrap 1 BTC into WBTC to use in DeFi. Depending on interpretation, this may be a disposal of BTC; record it and track the WBTC base cost.
Jurisdiction notes
- South Africa: SARS has not issued specific guidance on wrapping; treating it as a disposal is a conservative record-keeping approach.