diff --git a/app/app.go b/app/app.go
index af04a7b11..0d105a861 100644
--- a/app/app.go
+++ b/app/app.go
@@ -284,7 +284,7 @@ var (
 		auctiontypes.ModuleName:                       nil,
 		ibctransfertypes.ModuleName:                   {authtypes.Minter, authtypes.Burner},
 		icatypes.ModuleName:                           nil,
-		wasmtypes.ModuleName:                          {},
+		wasmtypes.ModuleName:                          {authtypes.Burner},
 		interchainqueriesmoduletypes.ModuleName:       nil,
 		feetypes.ModuleName:                           nil,
 		feeburnertypes.ModuleName:                     nil,
diff --git a/wasmbinding/test/custom_message_test.go b/wasmbinding/test/custom_message_test.go
index fe15d1d10..7ed2fc34a 100644
--- a/wasmbinding/test/custom_message_test.go
+++ b/wasmbinding/test/custom_message_test.go
@@ -3,8 +3,13 @@ package test
 import (
 	"encoding/json"
 	"fmt"
+	"strings"
 	"testing"
 
+	transfertypes "github.com/cosmos/ibc-go/v8/modules/apps/transfer/types"
+	clienttypes "github.com/cosmos/ibc-go/v8/modules/core/02-client/types"
+	ibctesting "github.com/cosmos/ibc-go/v8/testing"
+
 	contractmanagertypes "github.com/neutron-org/neutron/v4/x/contractmanager/types"
 	types2 "github.com/neutron-org/neutron/v4/x/cron/types"
 
@@ -79,7 +84,7 @@ func (suite *CustomMessengerTestSuite) SetupTest() {
 	suite.contractKeeper = keeper.NewDefaultPermissionKeeper(&suite.neutron.WasmKeeper)
 
 	err := suite.messenger.TokenFactory.SetParams(suite.ctx, tokenfactorytypes.NewParams(
-		sdk.NewCoins(sdk.NewInt64Coin(params.DefaultDenom, 10_000_000)),
+		sdk.NewCoins(sdk.NewInt64Coin(params.DefaultDenom, 100)),
 		0,
 		FeeCollectorAddress,
 		tokenfactorytypes.DefaultWhitelistedHooks,
@@ -731,6 +736,100 @@ func (suite *CustomMessengerTestSuite) TestAddRemoveSchedule() {
 	suite.NoError(err)
 }
 
+func (suite *CustomMessengerTestSuite) TestBurnTokens() {
+	// add NTRN to the contract
+	senderAddress := suite.ChainA.SenderAccounts[0].SenderAccount.GetAddress()
+	coinsAmnt := sdk.NewCoins(sdk.NewCoin(params.DefaultDenom, math.NewInt(int64(10_000_000))))
+	bankKeeper := suite.neutron.BankKeeper
+	err := bankKeeper.SendCoins(suite.ctx, senderAddress, suite.contractAddress, coinsAmnt)
+	suite.NoError(err)
+
+	suite.ConfigureTransferChannel()
+
+	// add IBC denom to the contract
+	// Create Transfer Msg
+	transferMsg := transfertypes.NewMsgTransfer(suite.TransferPath.EndpointB.ChannelConfig.PortID,
+		suite.TransferPath.EndpointB.ChannelID,
+		sdk.NewCoin(params.DefaultDenom, math.NewInt(100)),
+		suite.ChainB.SenderAccounts[0].SenderAccount.GetAddress().String(),
+		strings.TrimSpace(suite.contractAddress.String()),
+		clienttypes.NewHeight(1, 110),
+		0,
+		"",
+	)
+
+	// Send message from chainB to chainA
+	res, err := suite.TransferPath.EndpointB.Chain.SendMsgs(transferMsg)
+	suite.Require().NoError(err)
+
+	// Relay transfer msg to Neutron chain
+	packet, err := ibctesting.ParsePacketFromEvents(res.GetEvents())
+	suite.Require().NoError(err)
+
+	suite.Require().NoError(suite.TransferPath.RelayPacket(packet))
+	// -----------------------------------
+
+	// Add tf token to the contract
+	// Create denom for minting
+	fullMsg := bindings.NeutronMsg{
+		CreateDenom: &bindings.CreateDenom{
+			Subdenom: "tfdenom",
+		},
+	}
+
+	_, err = suite.executeNeutronMsg(suite.contractAddress, fullMsg)
+	suite.NoError(err)
+
+	tfDenom := fmt.Sprintf("factory/%s/%s", suite.contractAddress.String(), fullMsg.CreateDenom.Subdenom)
+
+	amount, ok := math.NewIntFromString("808010808")
+	require.True(suite.T(), ok)
+
+	fullMsg = bindings.NeutronMsg{
+		MintTokens: &bindings.MintTokens{
+			Denom:         tfDenom,
+			Amount:        amount,
+			MintToAddress: suite.contractAddress.String(),
+		},
+	}
+
+	_, err = suite.executeNeutronMsg(suite.contractAddress, fullMsg)
+	suite.NoError(err)
+
+	type testCase struct {
+		Name       string
+		CoinToBurn sdk.Coin
+	}
+
+	ibcTokenDenomHash, err := suite.neutron.TransferKeeper.DenomHash(
+		suite.ctx,
+		&transfertypes.QueryDenomHashRequest{Trace: ibctesting.TransferPort + "/" + suite.TransferPath.EndpointA.ChannelID + "/" + params.DefaultDenom})
+	suite.Require().NoError(err)
+
+	testcases := []testCase{
+		{Name: "burn NTRN", CoinToBurn: sdk.NewCoin(params.DefaultDenom, math.NewInt(1000))},
+		{Name: "burn tf denom", CoinToBurn: sdk.NewCoin(tfDenom, math.NewInt(1000))},
+		{Name: "burn ibc denom", CoinToBurn: sdk.NewCoin("ibc/"+ibcTokenDenomHash.Hash, math.NewInt(50))},
+	}
+
+	for _, tc := range testcases {
+		suite.Run(tc.Name, func() {
+			balanceBeforeBurn := bankKeeper.GetBalance(suite.ctx, suite.contractAddress, tc.CoinToBurn.Denom)
+
+			// Craft Burn message
+			msg := types.CosmosMsg{
+				Bank: &types.BankMsg{Burn: &types.BurnMsg{Amount: types.Array[types.Coin]{types.Coin{Amount: tc.CoinToBurn.Amount.String(), Denom: tc.CoinToBurn.Denom}}}},
+			}
+
+			// Dispatch Burn message
+			_, err = suite.executeMsg(suite.contractAddress, msg)
+			suite.NoError(err)
+
+			suite.Require().Equal(balanceBeforeBurn.Sub(tc.CoinToBurn), bankKeeper.GetBalance(suite.ctx, suite.contractAddress, tc.CoinToBurn.Denom))
+		})
+	}
+}
+
 func (suite *CustomMessengerTestSuite) TestResubmitFailureAck() {
 	// Add failure
 	packet := ibcchanneltypes.Packet{}
@@ -812,6 +911,10 @@ func (suite *CustomMessengerTestSuite) executeCustomMsg(contractAddress sdk.AccA
 		Custom: fullMsg,
 	}
 
+	return suite.executeMsg(contractAddress, customMsg)
+}
+
+func (suite *CustomMessengerTestSuite) executeMsg(contractAddress sdk.AccAddress, fullMsg types.CosmosMsg) (data []byte, err error) {
 	type ExecuteMsg struct {
 		ReflectMsg struct {
 			Msgs []types.CosmosMsg `json:"msgs"`
@@ -820,7 +923,7 @@ func (suite *CustomMessengerTestSuite) executeCustomMsg(contractAddress sdk.AccA
 
 	execMsg := ExecuteMsg{ReflectMsg: struct {
 		Msgs []types.CosmosMsg `json:"msgs"`
-	}(struct{ Msgs []types.CosmosMsg }{Msgs: []types.CosmosMsg{customMsg}})}
+	}(struct{ Msgs []types.CosmosMsg }{Msgs: []types.CosmosMsg{fullMsg}})}
 
 	msg, err := json.Marshal(execMsg)
 	suite.NoError(err)