diff --git a/modules/sdk-api/test/unit/bitgoAPI.ts b/modules/sdk-api/test/unit/bitgoAPI.ts
index 7bd81b41c9..cfbcc592cd 100644
--- a/modules/sdk-api/test/unit/bitgoAPI.ts
+++ b/modules/sdk-api/test/unit/bitgoAPI.ts
@@ -1163,7 +1163,7 @@ describe('Constructor', function () {
       sinon.assert.calledWithMatch(v1UpdatePasswordStub, { encryptionVersion: 2 });
       sinon.assert.calledWithMatch(v2UpdatePasswordStub, { encryptionVersion: 2 });
     });
-    it('shares one encryption session across keychain password updates', async function () {
+    it('creates one encryption session, passes it to both keychain update calls, and destroys it', async function () {
       nock(ROOT).get('/api/v2/user/checkBatchingPasswordFlow').query(true).reply(200, { isBatchingFlowEnabled: false });
       nock(ROOT)
         .post('/api/v1/user/changepassword', (body: unknown) => {
@@ -1186,6 +1186,14 @@ describe('Constructor', function () {
 
       sinon.assert.calledOnce(createSession);
       sinon.assert.calledWithExactly(createSession, 'newpw', 2);
+      // Call-site truth: the params object reaches both updatePassword calls, but the
+      // deprecated v1-leg (src/v1/keychains.ts) ignores encryptionSession/encryptionVersion
+      // and preserves each envelope's version -- see test/unit/v1/keychains.ts. Only the
+      // coin-leg consumes the session.
+      sinon.assert.calledWithMatch(v1UpdatePasswordStub, {
+        oldPassword: 'oldpw',
+        newPassword: 'newpw',
+      });
       sinon.assert.calledWithMatch(v1UpdatePasswordStub, {
         encryptionVersion: 2,
         encryptionSession: session,
diff --git a/modules/sdk-api/test/unit/v1/keychains.ts b/modules/sdk-api/test/unit/v1/keychains.ts
new file mode 100644
index 0000000000..c68bacdef5
--- /dev/null
+++ b/modules/sdk-api/test/unit/v1/keychains.ts
@@ -0,0 +1,122 @@
+import 'should';
+import * as sinon from 'sinon';
+import nock from 'nock';
+import type { IEncryptionSession } from '@bitgo/sdk-core';
+// CJS module.exports assignment; require idiom matches src/bitgoAPI.ts. The
+// structural contract below pins the surface this test exercises.
+interface V1UpdatePasswordResult {
+  keychains: Record<string, string>;
+  version: number;
+}
+
+interface V1Bitgo {
+  url(path: string): string;
+  post(url: string): { result(): Promise<unknown> };
+  decrypt(params: { input: string; password: string }): Promise<string>;
+  encrypt(params: { input: string; password: string; encryptionVersion?: number }): Promise<string>;
+}
+
+type V1KeychainsCtor = new (bitgo: V1Bitgo) => {
+  updatePassword(params: {
+    oldPassword: string;
+    newPassword: string;
+    encryptionVersion?: number;
+    encryptionSession?: IEncryptionSession;
+  }): Promise<V1UpdatePasswordResult>;
+};
+
+const Keychains: V1KeychainsCtor = require('../../../src/v1/keychains');
+
+const ROOT = 'https://app.example.local';
+
+/**
+ * The deprecated v1 keychains updatePassword (src/v1/keychains.ts) fetches the user's
+ * server-stored encryptedXprvs, re-encrypts each with the new password, and preserves
+ * each envelope's version (isV2Envelope ? 2 : 1). It deliberately ignores both
+ * `encryptionVersion` and `encryptionSession` -- v1 stays v1 during a v2 rotation and
+ * no session is ever consumed. These tests pin that wire behavior so the rollback
+ * contract documented in WCN-2640 cannot regress.
+ */
+describe('v1 Keychains.updatePassword', function () {
+  const v1Envelope = JSON.stringify({ v: 1, iter: 10000, salt: 'c2FsdA==', iv: 'aXY=', ct: 'Y3Q=' });
+  const v2Envelope = JSON.stringify({ v: 2, m: 65536, t: 3, p: 4, salt: 'c2FsdA==', iv: 'aXY=', ct: 'Y3Q=' });
+  const undecryptableEnvelope = JSON.stringify({ v: 1, iter: 10000, salt: 'YmFk', iv: 'aXY=', ct: 'Y3Q=' });
+
+  function makeBitgo(
+    stored: Record<string, string>,
+    decryptResults: Record<string, string>,
+    encryptStub: sinon.SinonStub
+  ) {
+    return {
+      url: (path: string) => `${ROOT}/api/v1${path}`,
+      post: () => ({ result: async () => ({ version: 25, keychains: stored }) }),
+      decrypt: async ({ input }: { input: string }) => {
+        const result = decryptResults[input];
+        if (result === undefined) {
+          throw new Error('decryption failed');
+        }
+        return result;
+      },
+      encrypt: encryptStub,
+    };
+  }
+
+  afterEach(function () {
+    nock.cleanAll();
+    sinon.restore();
+  });
+
+  it('ignores encryptionSession and preserves per-envelope versions under a v2 rotation', async function () {
+    const stored = { xpubV1: v1Envelope, xpubV2: v2Envelope };
+    nock(ROOT).post('/api/v1/user/encrypted').reply(200, { version: 25, keychains: stored });
+
+    const encryptStub = sinon.stub().resolves('re-encrypted');
+    const keychains = new Keychains(
+      makeBitgo(stored, { [v1Envelope]: 'plain-v1', [v2Envelope]: 'plain-v2' }, encryptStub)
+    );
+
+    const session: IEncryptionSession = {
+      encrypt: sinon.stub().resolves('session-encrypted'),
+      decrypt: sinon.stub().resolves('session-decrypted'),
+      destroy: sinon.stub(),
+    };
+
+    const result = await keychains.updatePassword({
+      oldPassword: 'oldpw',
+      newPassword: 'newpw',
+      encryptionVersion: 2,
+      encryptionSession: session,
+    });
+
+    // the v1-leg never touches the session: no encrypt, no destroy (destroy is the caller's job)
+    (session.encrypt as sinon.SinonStub).called.should.equal(false);
+    (session.destroy as sinon.SinonStub).called.should.equal(false);
+
+    // re-encryption preserves each envelope's own version: v1 -> encryptionVersion 1,
+    // v2 -> encryptionVersion 2, NOT the caller's encryptionVersion: 2 opt-in
+    encryptStub.calledTwice.should.equal(true);
+    encryptStub.getCall(0).args[0].encryptionVersion.should.equal(1);
+    encryptStub.getCall(1).args[0].encryptionVersion.should.equal(2);
+    encryptStub.alwaysCalledWithMatch({ password: 'newpw' }).should.equal(true);
+
+    result.keychains.should.deepEqual({ xpubV1: 're-encrypted', xpubV2: 're-encrypted' });
+    result.version.should.equal(25);
+  });
+
+  it('keeps keychains that cannot be decrypted with the old password unchanged', async function () {
+    const stored = { xpubV1: v1Envelope, xpubV2: v2Envelope, xpubUndecryptable: undecryptableEnvelope };
+    nock(ROOT).post('/api/v1/user/encrypted').reply(200, { version: 25, keychains: stored });
+
+    const encryptStub = sinon.stub().resolves('re-encrypted');
+    const keychains = new Keychains(
+      makeBitgo(stored, { [v1Envelope]: 'plain-v1', [v2Envelope]: 'plain-v2' }, encryptStub)
+    );
+
+    const result = await keychains.updatePassword({ oldPassword: 'oldpw', newPassword: 'newpw' });
+
+    encryptStub.calledTwice.should.equal(true);
+    result.keychains.xpubUndecryptable.should.equal(undecryptableEnvelope);
+    result.keychains.xpubV1.should.equal('re-encrypted');
+    result.keychains.xpubV2.should.equal('re-encrypted');
+  });
+});