diff --git a/lib/wallet/api/http/Cardano/Wallet/Api/Http/Server/Error.hs b/lib/wallet/api/http/Cardano/Wallet/Api/Http/Server/Error.hs
index a3e39aed9a2..16e1578f6c5 100644
--- a/lib/wallet/api/http/Cardano/Wallet/Api/Http/Server/Error.hs
+++ b/lib/wallet/api/http/Cardano/Wallet/Api/Http/Server/Error.hs
@@ -515,6 +515,11 @@ instance IsServerError ErrConstructTx where
             , "The exact error is: "
             , T.pack (show cryptoError)
             ]
+        ErrConstructTxIncorrectRawMetadata ->
+            apiError err403 InvalidMetadataEncryption $ mconcat
+            [ "It looks like the metadata to be encrypted does not "
+            , "have `msg` field which value is to be encrypted."
+            ]
 
 
 instance IsServerError ErrGetPolicyId where
diff --git a/lib/wallet/api/http/Cardano/Wallet/Api/Http/Shelley/Server.hs b/lib/wallet/api/http/Cardano/Wallet/Api/Http/Shelley/Server.hs
index 6cfeda6b3d0..f49c51ba757 100644
--- a/lib/wallet/api/http/Cardano/Wallet/Api/Http/Shelley/Server.hs
+++ b/lib/wallet/api/http/Cardano/Wallet/Api/Http/Shelley/Server.hs
@@ -938,6 +938,8 @@ import qualified Network.Ntp as Ntp
 import qualified Network.Wai.Handler.Warp as Warp
 import qualified Network.Wai.Handler.WarpTLS as Warp
 
+import qualified Debug.Trace as TR
+
 -- | Allow configuring which port the wallet server listen to in an integration
 -- setup. Crashes if the variable is not a number.
 walletListenFromEnv :: Show e
@@ -3087,24 +3089,56 @@ encryptionNonce :: ByteString
 encryptionNonce = "encrypt-data"
 
 -- When encryption is enabled we do the following:
--- (a) toJSON on metadata,
--- (b) encrypt it
--- (c) and create new tx metadata
---     (0, TxMetaBytes chunk1)
---     (1, TxMetaBytes chunk2)
---     ....
---     (N, TxMetaBytes chunkN)
---     until encrypted metadata is accommodated
+-- (a) find field `msg`
+-- (b) encrypt its value if present, otherwise emit error
+-- (c) and update value of `msg` with the encrypted initial value encoded in base64
+--     [TxMetaText base64_1, TxMetaText base64_2, ..., TxMetaText base64_n]
+-- (d) add `enc` field with encryption method value ("base" or "chachapoly1305")
 toMetadataEncrypted
     :: ApiEncryptMetadata
     -> TxMetadataWithSchema
     -> Either ErrConstructTx Cardano.TxMetadata
 toMetadataEncrypted apiEncrypt payload = do
+    msgValue <- findMsgValue
     encrypted <- encrypt . toBytes $ payload
-    pure $ toMetadata encrypted
+    TR.trace ("msgValue: "<> show msgValue<>"\nfindMsgValue1: "<> show findMsgValue1) $ pure $ toMetadata encrypted
   where
     ((secretKey,iv), encMethod) = unwrapApiMetadata apiEncrypt
 
+    getMsgValue (Cardano.TxMetaText metaField, metaValue) =
+        if metaField == "msg" then
+            Just metaValue
+        else Nothing
+    getMsgValue _ = Nothing
+    join Nothing (Just val) = Just val
+    join (Just val) Nothing = Just val
+    join Nothing Nothing = Nothing
+    join (Just val1) (Just val2) = error "only one 'msg' field expected"
+    -- assumption: `msg` is not embedded beyond first level
+    -- we could change that in the future
+    inspectMetaPair (Cardano.TxMetaMap pairs) =
+        foldl join Nothing (getMsgValue <$> pairs)
+    inspectMetaPair _ = Nothing
+    mapMetaPair val Nothing = val
+    mapMetaPair _ (Just val) =
+        Cardano.TxMetaBytes $
+        BL.toStrict $
+        Aeson.encode $
+        Cardano.metadataValueToJsonNoSchema val
+    adjustVals val =
+        let temp = inspectMetaPair val
+        in mapMetaPair val temp
+    findMsgValue =
+        let (Cardano.TxMetadata themap) = payload ^. #txMetadataWithSchema_metadata
+            filteredMap = Map.filter (isJust . inspectMetaPair) themap
+        in if Map.size filteredMap == 1 then
+            Right $ Map.toList filteredMap
+           else
+            Left ErrConstructTxIncorrectRawMetadata
+    findMsgValue1 =
+        let (Cardano.TxMetadata themap) = payload ^. #txMetadataWithSchema_metadata
+        in Map.map adjustVals themap
+
     toBytes = BL.toStrict . Aeson.encode
 
     encrypt = case encMethod of
diff --git a/lib/wallet/integration/src/Test/Integration/Scenario/API/Shelley/TransactionsNew.hs b/lib/wallet/integration/src/Test/Integration/Scenario/API/Shelley/TransactionsNew.hs
index 00c01a063dc..aad36658b39 100644
--- a/lib/wallet/integration/src/Test/Integration/Scenario/API/Shelley/TransactionsNew.hs
+++ b/lib/wallet/integration/src/Test/Integration/Scenario/API/Shelley/TransactionsNew.hs
@@ -104,6 +104,7 @@ import Cardano.Wallet.Api.Types
     , ApiWallet
     , ApiWalletInput (..)
     , ApiWalletOutput (..)
+    , EncryptMetadataMethod (..)
     , ResourceContext (..)
     , WalletStyle (..)
     , fromApiEra
@@ -518,7 +519,12 @@ spec = describe "NEW_SHELLEY_TRANSACTIONS" $ do
 
     it "TRANS_NEW_CREATE_02c - Small metadata encrypted" $
         \ctx -> runResourceT $ do
-            let metadataRaw = TxMetadata (Map.fromList [(1,TxMetaText "hello")])
+            let metadataRaw =
+                    TxMetadata (Map.fromList
+                                [ (0,TxMetaText "hello")
+                                , (1,TxMetaMap [(TxMetaText "msg", TxMetaText "hello")])
+                                , (50, TxMetaNumber 1245)
+                                ])
             checkMetadataEncrytion ctx metadataRaw
 
     it "TRANS_NEW_CREATE_02d - Big metadata encrypted" $
@@ -5248,7 +5254,7 @@ spec = describe "NEW_SHELLEY_TRANSACTIONS" $ do
         let metadataToBeEncrypted =
                 TxMetadataWithSchema TxMetadataNoSchema metadataRaw
         let encryptMetadata =
-                ApiEncryptMetadata (ApiT $ Passphrase "metadata-secret") Nothing
+                ApiEncryptMetadata (ApiT $ Passphrase "metadata-secret") (Just ChaChaPoly1305)
         let payload = Json [json|{
                 "encrypt_metadata": #{toJSON encryptMetadata},
                 "metadata": #{toJSON metadataToBeEncrypted}
diff --git a/lib/wallet/src/Cardano/Wallet.hs b/lib/wallet/src/Cardano/Wallet.hs
index a1a5988bc8c..5102d632738 100644
--- a/lib/wallet/src/Cardano/Wallet.hs
+++ b/lib/wallet/src/Cardano/Wallet.hs
@@ -3547,6 +3547,7 @@ data ErrConstructTx
     | ErrConstructTxSharedWalletIncomplete
     | ErrConstructTxDelegationInvalid
     | ErrConstructTxEncryptMetadata CryptoError
+    | ErrConstructTxIncorrectRawMetadata
     | ErrConstructTxNotImplemented
     deriving (Show, Eq)