diff --git a/x/onboarding/keeper/ibc_callbacks.go b/x/onboarding/keeper/ibc_callbacks.go
index 3abe25ff..bf6acab7 100644
--- a/x/onboarding/keeper/ibc_callbacks.go
+++ b/x/onboarding/keeper/ibc_callbacks.go
@@ -137,8 +137,9 @@ func (k Keeper) OnRecvPacket(
 	// Use cached context to revert the state if the conversion fails
 
 	cacheCtx, writeCache := ctx.CacheContext()
-	if _, err = k.erc20Keeper.ConvertCoin(sdk.WrapSDKContext(cacheCtx), convertMsg); err != nil {
+	if _, err = k.erc20Keeper.ConvertCoin(cacheCtx, convertMsg); err != nil {
 		logger.Error("failed to convert coins", "error", err)
+		convertCoin = sdk.NewCoin(transferredCoin.Denom, sdkmath.ZeroInt())
 	} else {
 		writeCache()
 	}
diff --git a/x/onboarding/keeper/ibc_callbacks_test.go b/x/onboarding/keeper/ibc_callbacks_test.go
index e86c96df..a679a0ca 100644
--- a/x/onboarding/keeper/ibc_callbacks_test.go
+++ b/x/onboarding/keeper/ibc_callbacks_test.go
@@ -339,6 +339,25 @@ func (suite *KeeperTestSuite) TestOnRecvPacket() {
 			sdk.NewCoin(uusdcIbcdenom, sdkmath.NewInt(20998399)),
 			sdkmath.NewInt(0),
 		},
+		{
+			"convert fail due to evm call failure - cached context is discarded (escrow occured during convert coin is reverted)",
+			func() {
+				cantoChannel = "channel-0"
+				transferAmount = sdkmath.NewIntWithDecimal(25, 6)
+				transfer := transfertypes.NewFungibleTokenPacketData(denom, transferAmount.String(), secpAddrCosmos, ethsecpAddrcanto, "")
+				bz := transfertypes.ModuleCdc.MustMarshalJSON(&transfer)
+				packet = channeltypes.NewPacket(bz, 100, transfertypes.PortID, sourceChannel, transfertypes.PortID, cantoChannel, timeoutHeight, 0)
+				mockErc20Keeper := NewMockErc20Keeper(suite.app.Erc20Keeper, suite.app.BankKeeper)
+				suite.app.OnboardingKeeper.SetErc20Keeper(mockErc20Keeper)
+				mockErc20Keeper.On("ConvertCoin", mock.Anything, mock.Anything).Return(nil, fmt.Errorf("Call EVM Failed"))
+
+			},
+			true,
+			sdk.NewCoins(sdk.NewCoin("acanto", sdkmath.ZeroInt())),
+			sdk.NewCoin("acanto", sdkmath.NewIntWithDecimal(4, 18)),
+			sdk.NewCoin(uusdcIbcdenom, sdkmath.NewInt(20998399)),
+			sdkmath.ZeroInt(),
+		},
 	}
 	for _, tc := range testCases {
 		suite.Run(fmt.Sprintf("Case %s", tc.name), func() {
@@ -381,8 +400,6 @@ func (suite *KeeperTestSuite) TestOnRecvPacket() {
 			suite.Require().NotNil(usdtPair)
 			suite.app.Erc20Keeper.SetTokenPair(suite.ctx, *usdtPair)
 
-			tc.malleate()
-
 			// Set Denom Trace
 			denomTrace := transfertypes.DenomTrace{
 				Path:      path,
@@ -416,6 +433,8 @@ func (suite *KeeperTestSuite) TestOnRecvPacket() {
 			suite.Require().True(found)
 			suite.app.OnboardingKeeper = keeper.NewKeeper(sp, suite.app.AccountKeeper, suite.app.BankKeeper, suite.app.IBCKeeper.ChannelKeeper, mockTransferKeeper, suite.app.CoinswapKeeper, suite.app.Erc20Keeper, authtypes.NewModuleAddress(govtypes.ModuleName).String())
 
+			tc.malleate()
+
 			// Fund receiver account with canto, IBC vouchers
 			testutil.FundAccount(suite.app.BankKeeper, suite.ctx, ethsecpAddr, tc.receiverBalance)
 			// Fund receiver account with the transferred amount
diff --git a/x/onboarding/keeper/keeper.go b/x/onboarding/keeper/keeper.go
index 1116bf70..0deac832 100644
--- a/x/onboarding/keeper/keeper.go
+++ b/x/onboarding/keeper/keeper.go
@@ -100,3 +100,7 @@ func (k Keeper) WriteAcknowledgement(ctx sdk.Context, channelCap *capabilitytype
 func (k Keeper) GetAppVersion(ctx sdk.Context, portID, channelID string) (string, bool) {
 	return k.ics4Wrapper.GetAppVersion(ctx, portID, channelID)
 }
+
+func (k *Keeper) SetErc20Keeper(ek types.Erc20Keeper) {
+	k.erc20Keeper = ek
+}
diff --git a/x/onboarding/keeper/utils_test.go b/x/onboarding/keeper/utils_test.go
index 3ad3b7cf..d3c5c5a9 100644
--- a/x/onboarding/keeper/utils_test.go
+++ b/x/onboarding/keeper/utils_test.go
@@ -1,6 +1,15 @@
 package keeper_test
 
 import (
+	"context"
+	"math/big"
+
+	errorsmod "cosmossdk.io/errors"
+	erc20keeper "github.com/Canto-Network/Canto/v8/x/erc20/keeper"
+	erc20types "github.com/Canto-Network/Canto/v8/x/erc20/types"
+	"github.com/ethereum/go-ethereum/accounts/abi"
+	"github.com/ethereum/go-ethereum/common"
+	evmtypes "github.com/evmos/ethermint/x/evm/types"
 	"github.com/stretchr/testify/mock"
 
 	tmbytes "github.com/cometbft/cometbft/libs/bytes"
@@ -49,3 +58,52 @@ func (m *MockTransferKeeper) SendTransfer(
 
 	return args.Error(0)
 }
+
+type MockErc20Keeper struct {
+	mock.Mock
+	erc20keeper erc20keeper.Keeper
+	bankKeeper  bankkeeper.Keeper
+}
+
+func NewMockErc20Keeper(ek erc20keeper.Keeper, bk bankkeeper.Keeper) *MockErc20Keeper {
+	return &MockErc20Keeper{erc20keeper: ek, bankKeeper: bk}
+}
+
+func (m *MockErc20Keeper) ConvertCoin(
+	goCtx context.Context,
+	msg *erc20types.MsgConvertCoin,
+) (*erc20types.MsgConvertCoinResponse, error) {
+	sender, _ := sdk.AccAddressFromBech32(msg.Sender)
+
+	coins := sdk.Coins{msg.Coin}
+	err := m.bankKeeper.SendCoinsFromAccountToModule(goCtx, sender, types.ModuleName, coins)
+	if err != nil {
+		return nil, errorsmod.Wrap(err, "failed to escrow coins")
+	}
+	argsMock := m.Called(goCtx, msg)
+	return nil, argsMock.Error(1)
+}
+
+func (m *MockErc20Keeper) GetTokenPairID(ctx sdk.Context, token string) []byte {
+	return m.erc20keeper.GetTokenPairID(ctx, token)
+}
+
+func (m *MockErc20Keeper) GetTokenPair(ctx sdk.Context, id []byte) (erc20types.TokenPair, bool) {
+	return m.erc20keeper.GetTokenPair(ctx, id)
+}
+
+func (m *MockErc20Keeper) BalanceOf(ctx sdk.Context, abi abi.ABI, contract, account common.Address) *big.Int {
+	return m.erc20keeper.BalanceOf(ctx, abi, contract, account)
+}
+
+func (m *MockErc20Keeper) CallEVM(
+	ctx sdk.Context,
+	abi abi.ABI,
+	from, contract common.Address,
+	commit bool,
+	method string,
+	args ...interface{},
+) (*evmtypes.MsgEthereumTxResponse, error) {
+	argsMock := m.Called(ctx, abi, from, contract, commit, method, args)
+	return nil, argsMock.Error(1)
+}