diff --git a/libs/web3-api-provider/src/VAnchor.ts b/libs/web3-api-provider/src/VAnchor.ts
index e7ad90888f..7a016bb50b 100644
--- a/libs/web3-api-provider/src/VAnchor.ts
+++ b/libs/web3-api-provider/src/VAnchor.ts
@@ -492,14 +492,19 @@ class VAnchor {
     account: Account
   ) {
     const userAddress = account.address;
+
     const tokenInstance = getContract({
       address: tokenAddress,
       abi: ERC20__factory.abi,
       publicClient: this.publicClient,
     });
+
+    // When wrapping, we need to check allowance of the fungible token
+    // as the fungible token is the contract that transfers the token
+    // from the user to the contract
     const tokenAllowance = await tokenInstance.read.allowance([
       userAddress,
-      this.contract.address,
+      this.fungibleToken,
     ]);
 
     if (tokenAllowance < depositAmount) {
diff --git a/libs/web3-api-provider/src/webb-provider/vanchor-actions.ts b/libs/web3-api-provider/src/webb-provider/vanchor-actions.ts
index a9d37b4363..67c6ed8a80 100644
--- a/libs/web3-api-provider/src/webb-provider/vanchor-actions.ts
+++ b/libs/web3-api-provider/src/webb-provider/vanchor-actions.ts
@@ -879,8 +879,7 @@ export class Web3VAnchorActions extends VAnchorActions<
       this.inner.publicClient
     );
 
-    const spenderAddress = srcVAnchor.contract.address;
-    const currentWebbToken = srcVAnchor.getWebbToken();
+    const currentFungibleToken = srcVAnchor.getWebbToken();
 
     const amountBI = BigInt(amount);
 
@@ -890,7 +889,7 @@ export class Web3VAnchorActions extends VAnchorActions<
 
     // If the `wrapUnwrapToken` is different from the `currentWebbToken` address,
     // we are wrapping / unwrapping. otherwise, we are depositing / withdrawing.
-    const isWrapOrUnwrap = wrapUnwrapToken !== currentWebbToken.address;
+    const isWrapOrUnwrap = wrapUnwrapToken !== currentFungibleToken.address;
 
     // Only non-native tokens require approval
     if (!isNative) {
@@ -920,8 +919,10 @@ export class Web3VAnchorActions extends VAnchorActions<
             publicClient: this.inner.publicClient,
           });
 
+          // On the wrap case, we need to approve the tokenWrapper contract
+          // to spend the token on behalf of the user to wrap it.
           const { request } = await tokenContract.simulate.approve(
-            [spenderAddress, approvalValue],
+            [currentFungibleToken.address, approvalValue],
             {
               gas: BigInt('0x5B8D80'),
               account,
@@ -930,9 +931,10 @@ export class Web3VAnchorActions extends VAnchorActions<
 
           approvalHash = await this.inner.walletClient.writeContract(request);
         } else {
-          // approve the token
-          const { request } = await currentWebbToken.simulate.approve(
-            [spenderAddress, amountBI],
+          // If we are depositing (without wrapping), we need to approve the
+          // VAnchor contract to spend the user's fungible token.
+          const { request } = await currentFungibleToken.simulate.approve(
+            [srcVAnchor.contract.address, amountBI],
             {
               gas: BigInt('0x5B8D80'),
               account,