diff --git a/changelog.md b/changelog.md
index 31fe5550fc..0f0a2c4318 100644
--- a/changelog.md
+++ b/changelog.md
@@ -22,6 +22,7 @@
 * [2615](https://github.com/zeta-chain/node/pull/2615) - Refactor cleanup of outbound trackers
 * [2749](https://github.com/zeta-chain/node/pull/2749) - fix all lint errors from govet
 * [2725](https://github.com/zeta-chain/node/pull/2725) - refactor SetCctxAndNonceToCctxAndInboundHashToCctx to receive tsspubkey as an argument
+* [2802](https://github.com/zeta-chain/node/pull/2802) - set default liquidity cap for new ZRC20s
 
 ### Tests
 
diff --git a/e2e/txserver/zeta_tx_server.go b/e2e/txserver/zeta_tx_server.go
index 41270e2bb4..b0e6cecce2 100644
--- a/e2e/txserver/zeta_tx_server.go
+++ b/e2e/txserver/zeta_tx_server.go
@@ -39,6 +39,7 @@ import (
 
 	"github.com/zeta-chain/node/app"
 	"github.com/zeta-chain/node/cmd/zetacored/config"
+	"github.com/zeta-chain/node/e2e/utils"
 	"github.com/zeta-chain/node/pkg/chains"
 	"github.com/zeta-chain/node/pkg/coin"
 	authoritytypes "github.com/zeta-chain/node/x/authority/types"
@@ -441,7 +442,7 @@ func (zts ZetaTxServer) DeployZRC20s(
 	}
 
 	// deploy eth zrc20
-	_, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
+	res, err := zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
 		deployerAddr,
 		"",
 		chains.GoerliLocalnet.ChainId,
@@ -454,9 +455,16 @@ func (zts ZetaTxServer) DeployZRC20s(
 	if err != nil {
 		return "", fmt.Errorf("failed to deploy eth zrc20: %s", err.Error())
 	}
+	zrc20, err := fetchZRC20FromDeployResponse(res)
+	if err != nil {
+		return "", err
+	}
+	if err := zts.initializeLiquidityCap(zrc20); err != nil {
+		return "", err
+	}
 
 	// deploy btc zrc20
-	_, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
+	res, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
 		deployerAddr,
 		"",
 		chains.BitcoinRegtest.ChainId,
@@ -469,9 +477,16 @@ func (zts ZetaTxServer) DeployZRC20s(
 	if err != nil {
 		return "", fmt.Errorf("failed to deploy btc zrc20: %s", err.Error())
 	}
+	zrc20, err = fetchZRC20FromDeployResponse(res)
+	if err != nil {
+		return "", err
+	}
+	if err := zts.initializeLiquidityCap(zrc20); err != nil {
+		return "", err
+	}
 
 	// deploy sol zrc20
-	_, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
+	res, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
 		deployerAddr,
 		"",
 		chains.SolanaLocalnet.ChainId,
@@ -484,9 +499,16 @@ func (zts ZetaTxServer) DeployZRC20s(
 	if err != nil {
 		return "", fmt.Errorf("failed to deploy sol zrc20: %s", err.Error())
 	}
+	zrc20, err = fetchZRC20FromDeployResponse(res)
+	if err != nil {
+		return "", err
+	}
+	if err := zts.initializeLiquidityCap(zrc20); err != nil {
+		return "", err
+	}
 
 	// deploy erc20 zrc20
-	res, err := zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
+	res, err = zts.BroadcastTx(deployerAccount, fungibletypes.NewMsgDeployFungibleCoinZRC20(
 		deployerAddr,
 		erc20Addr,
 		chains.GoerliLocalnet.ChainId,
@@ -501,12 +523,12 @@ func (zts ZetaTxServer) DeployZRC20s(
 	}
 
 	// fetch the erc20 zrc20 contract address and remove the quotes
-	erc20zrc20Addr, err := FetchAttributeFromTxResponse(res, "Contract")
+	erc20zrc20Addr, err := fetchZRC20FromDeployResponse(res)
 	if err != nil {
-		return "", fmt.Errorf("failed to fetch erc20 zrc20 contract address: %s, %s", err.Error(), res.String())
+		return "", err
 	}
-	if !ethcommon.IsHexAddress(erc20zrc20Addr) {
-		return "", fmt.Errorf("invalid address in event: %s", erc20zrc20Addr)
+	if err := zts.initializeLiquidityCap(erc20zrc20Addr); err != nil {
+		return "", err
 	}
 
 	return erc20zrc20Addr, nil
@@ -557,6 +579,33 @@ func (zts *ZetaTxServer) SetAuthorityClient(authorityClient authoritytypes.Query
 	zts.authorityClient = authorityClient
 }
 
+// initializeLiquidityCap initializes the liquidity cap for the given coin with a large value
+func (zts ZetaTxServer) initializeLiquidityCap(zrc20 string) error {
+	liquidityCap := sdktypes.NewUint(1e18).MulUint64(1e12)
+
+	msg := fungibletypes.NewMsgUpdateZRC20LiquidityCap(
+		zts.MustGetAccountAddressFromName(utils.OperationalPolicyName),
+		zrc20,
+		liquidityCap,
+	)
+	_, err := zts.BroadcastTx(utils.OperationalPolicyName, msg)
+	return err
+}
+
+// fetchZRC20FromDeployResponse fetches the zrc20 address from the response
+func fetchZRC20FromDeployResponse(res *sdktypes.TxResponse) (string, error) {
+	// fetch the erc20 zrc20 contract address and remove the quotes
+	zrc20Addr, err := FetchAttributeFromTxResponse(res, "Contract")
+	if err != nil {
+		return "", fmt.Errorf("failed to fetch zrc20 contract address: %s, %s", err.Error(), res.String())
+	}
+	if !ethcommon.IsHexAddress(zrc20Addr) {
+		return "", fmt.Errorf("invalid address in event: %s", zrc20Addr)
+	}
+
+	return zrc20Addr, nil
+}
+
 // fetchMessagePermissions fetches the message permissions for a given message
 // return a bool preV19 to indicate the node is preV19 and the query doesn't exist
 func (zts ZetaTxServer) fetchMessagePermissions(msg sdktypes.Msg) (authoritytypes.PolicyType, bool, error) {
diff --git a/x/fungible/keeper/evm.go b/x/fungible/keeper/evm.go
index 3f975a23ea..ab0332dfe3 100644
--- a/x/fungible/keeper/evm.go
+++ b/x/fungible/keeper/evm.go
@@ -34,12 +34,10 @@ import (
 	observertypes "github.com/zeta-chain/node/x/observer/types"
 )
 
-// TODO USE string constant
 var (
 	BigIntZero                 = big.NewInt(0)
 	ZEVMGasLimitDepositAndCall = big.NewInt(1_000_000)
-
-	ZEVMGasLimitConnectorCall = big.NewInt(1_000_000)
+	ZEVMGasLimitConnectorCall  = big.NewInt(1_000_000)
 )
 
 // DeployContract deploys a new contract in the ZEVM
@@ -98,9 +96,6 @@ func (k Keeper) DeployContract(
 
 // DeployZRC20Contract creates and deploys an ERC20 contract on the EVM with the
 // erc20 module account as owner. Also adds itself to ForeignCoins fungible module state variable
-// TODO Unit test for these functions
-// https://github.com/zeta-chain/node/issues/864
-// TODO Remove repetitive code
 func (k Keeper) DeployZRC20Contract(
 	ctx sdk.Context,
 	name, symbol string,
@@ -154,17 +149,20 @@ func (k Keeper) DeployZRC20Contract(
 			err.Error(),
 		)
 	}
-	coin, _ := k.GetForeignCoins(ctx, contractAddr.Hex())
-	coin.CoinType = coinType
-	coin.Name = name
-	coin.Symbol = symbol
+
+	// create and set in the store the new foreign coin object
+	newCoin, _ := k.GetForeignCoins(ctx, contractAddr.Hex())
+	newCoin.CoinType = coinType
+	newCoin.Name = name
+	newCoin.Symbol = symbol
 	// #nosec G115 uint8 -> uint32 false positive
-	coin.Decimals = uint32(decimals)
-	coin.Asset = erc20Contract
-	coin.Zrc20ContractAddress = contractAddr.Hex()
-	coin.ForeignChainId = chain.ChainId
-	coin.GasLimit = gasLimit.Uint64()
-	k.SetForeignCoins(ctx, coin)
+	newCoin.Decimals = uint32(decimals)
+	newCoin.Asset = erc20Contract
+	newCoin.Zrc20ContractAddress = contractAddr.Hex()
+	newCoin.ForeignChainId = chain.ChainId
+	newCoin.GasLimit = gasLimit.Uint64()
+	newCoin.LiquidityCap = sdk.NewUint(types.DefaultLiquidityCap).MulUint64(uint64(newCoin.Decimals))
+	k.SetForeignCoins(ctx, newCoin)
 
 	return contractAddr, nil
 }
diff --git a/x/fungible/keeper/evm_test.go b/x/fungible/keeper/evm_test.go
index 10b15e8401..7c0ef0bf00 100644
--- a/x/fungible/keeper/evm_test.go
+++ b/x/fungible/keeper/evm_test.go
@@ -316,6 +316,7 @@ func TestKeeper_DeployZRC20Contract(t *testing.T) {
 		require.Equal(t, "bar", foreignCoins.Symbol)
 		require.Equal(t, coin.CoinType_Gas, foreignCoins.CoinType)
 		require.Equal(t, uint64(1000), foreignCoins.GasLimit)
+		require.True(t, foreignCoins.LiquidityCap.Equal(sdk.NewUint(types.DefaultLiquidityCap).MulUint64(8)))
 
 		// can get the zrc20 data
 		zrc20Data, err := k.QueryZRC20Data(ctx, addr)
diff --git a/x/fungible/keeper/gas_coin_and_pool_test.go b/x/fungible/keeper/gas_coin_and_pool_test.go
index 1b7315393c..186828c8b4 100644
--- a/x/fungible/keeper/gas_coin_and_pool_test.go
+++ b/x/fungible/keeper/gas_coin_and_pool_test.go
@@ -43,6 +43,13 @@ func setupGasCoin(
 	)
 	require.NoError(t, err)
 	assertContractDeployment(t, evmk, ctx, addr)
+
+	// increase the default liquidity cap
+	foreignCoin, found := k.GetForeignCoins(ctx, addr.Hex())
+	require.True(t, found)
+	foreignCoin.LiquidityCap = sdk.NewUint(1e18).MulUint64(1e12)
+	k.SetForeignCoins(ctx, foreignCoin)
+
 	return addr
 }
 
@@ -68,6 +75,13 @@ func deployZRC20(
 	)
 	require.NoError(t, err)
 	assertContractDeployment(t, evmk, ctx, addr)
+
+	// increase the default liquidity cap
+	foreignCoin, found := k.GetForeignCoins(ctx, addr.Hex())
+	require.True(t, found)
+	foreignCoin.LiquidityCap = sdk.NewUint(1e18).MulUint64(1e12)
+	k.SetForeignCoins(ctx, foreignCoin)
+
 	return addr
 }
 
diff --git a/x/fungible/types/zrc20.go b/x/fungible/types/zrc20.go
index 3b6865f8fd..97c94ddcdc 100644
--- a/x/fungible/types/zrc20.go
+++ b/x/fungible/types/zrc20.go
@@ -2,6 +2,11 @@ package types
 
 import ethcommon "github.com/ethereum/go-ethereum/common"
 
+// DefaultLiquidityCap is the default value set for the liquidity cap of a new ZRC20 when deployed
+// for security reason, this value is low. An arbitrary value should be set during the process of deploying a new ZRC20
+// The value is represented in the base unit of the ZRC20, final value is calculated by multiplying this value by 10^decimals
+const DefaultLiquidityCap = uint64(1000)
+
 // ZRC20Data represents the ZRC4 token details used to map
 // the token to a Cosmos Coin
 type ZRC20Data struct {