A type of wrapped token (see: types of wrapped tokens) whose value is sustained and validated by two parties: a custodian and a merchant. Both parties validate transactions using the proof-of-stake (PoS) consensus mechanism and ensure the token/ coin is securely stored on the network. Central wrapping involves converting a token/ coin into its wrapped form, first by delivering it to a merchant. The merchant uses the token/ coin as collateral deposited with a custodian that, in turn, provides the desired wrapped coin. A crypto custodian is a certified company that is in the business of holding the digital assets of corporates or individuals on their behalf.

Usually, the wrapping process is carried out to tokens which have or provide utility outside their native blockchains. For non-central type (non-central wrapped token), and as the name suggests, the wrapped token class does not involve any custodial services provided by third-parties. Minting of non-central wrapped tokens is handled on a decentralized autonomous organization (DAO). DAOs are entities with no central management, that are governed by a community of developers and interested stakeholders operating and organized around a specific set of rules enforced on a blockchain. DAOs function by means of smart contracts, which sets of pre-coded instructions and procedures that automatically execute once a set of criteria are satisfied. These entities are constructed on open-source blockchains, and hence operate in full autonomy and transparency to the market (all parties have access to their code). One of the most commonplace examples of a central wrapped coin is the wrapped bitcoin (WBTC), an ERC-20 token. ERC-20 is a standard for mining and validating a token or similar asset on the Ethereum blockchain and virtual machine.

Central wrapped tokens are also known as custodial wrapped tokens.