diff --git a/packages/wallets/src/components/FormDropdown/__tests__/FormDropdown.spec.tsx b/packages/wallets/src/components/FormDropdown/__tests__/FormDropdown.spec.tsx
new file mode 100644
index 000000000000..25890a200f1f
--- /dev/null
+++ b/packages/wallets/src/components/FormDropdown/__tests__/FormDropdown.spec.tsx
@@ -0,0 +1,100 @@
+import React, { ComponentProps } from 'react';
+import { Formik } from 'formik';
+import * as Yup from 'yup';
+import { render, screen, waitFor } from '@testing-library/react';
+import userEvent from '@testing-library/user-event';
+import FormDropdown from '../FormDropdown';
+
+jest.mock('@deriv-com/ui', () => ({
+    Dropdown: jest.fn(({ list, onBlur, onSearch, onSelect, ...props }) => {
+        return (
+            <>
+                {list.map((item: { text: string; value: string }) => {
+                    return (
+                        <div data-testid={`dt_${props.name}`} key={item.value} {...props}>
+                            <input onBlur={onBlur} onChange={e => onSearch(e.target.value)} placeholder='Search...' />
+                            <button onClick={() => onSelect(item.value)}>Select {item.text}</button>
+                        </div>
+                    );
+                })}
+            </>
+        );
+    }),
+}));
+
+const setup = (props: ComponentProps<typeof FormDropdown>) => {
+    return render(
+        <Formik initialValues={{ [props.name || 'test']: '' }} onSubmit={jest.fn()}>
+            <FormDropdown {...props} />
+        </Formik>
+    );
+};
+describe('FormDropdown', () => {
+    test('renders FormDropdown correctly', () => {
+        setup({ list: [{ text: 'Option 1', value: 'option1' }], name: 'test' });
+
+        expect(screen.getByPlaceholderText('Search...')).toBeInTheDocument();
+    });
+
+    test('applies validation schema', async () => {
+        const validationSchema = Yup.string().required('Required');
+
+        setup({ list: [{ text: 'Option 1', value: 'option1' }], name: 'test', validationSchema });
+
+        userEvent.click(screen.getByText('Select Option 1'));
+
+        await waitFor(() => {
+            expect(screen.queryByText('Required')).not.toBeInTheDocument();
+        });
+    });
+
+    test('handles search and select for combobox variant', () => {
+        const onSelectMock = jest.fn();
+        const onSearchMock = jest.fn();
+
+        setup({
+            list: [{ text: 'Option 1', value: 'option1' }],
+            name: 'test',
+            onSearch: onSearchMock,
+            onSelect: onSelectMock,
+            variant: 'comboBox',
+        });
+        userEvent.type(screen.getByPlaceholderText('Search...'), 'Option 1');
+        userEvent.tab();
+        userEvent.click(screen.getByText('Select Option 1'));
+
+        expect(onSearchMock).toHaveBeenCalledWith('Option 1');
+        expect(onSelectMock).toHaveBeenCalledWith('option1');
+    });
+    test('handles search and select for prompt variant', () => {
+        const onSelectMock = jest.fn();
+        const onSearchMock = jest.fn();
+
+        setup({
+            list: [{ text: 'Option 1', value: 'option1' }],
+            name: 'test',
+            onSearch: onSearchMock,
+            onSelect: onSelectMock,
+            variant: 'prompt',
+        });
+        userEvent.type(screen.getByPlaceholderText('Search...'), 'Option 1');
+        userEvent.tab();
+        userEvent.click(screen.getByText('Select Option 1'));
+
+        expect(onSearchMock).toHaveBeenCalledWith('Option 1');
+        expect(onSelectMock).toHaveBeenCalledWith('option1');
+    });
+
+    test('shows error message when field is invalid', async () => {
+        const validationSchema = Yup.string().nullable().required('Required');
+
+        setup({ list: [{ text: 'Option 1', value: '' }], name: 'test', validationSchema });
+
+        userEvent.type(screen.getByPlaceholderText('Search...'), 'Option 1');
+        userEvent.click(screen.getByText('Select Option 1'));
+
+        await waitFor(() => {
+            expect(screen.getByTestId('dt_test')).toHaveAttribute('errormessage', 'Required');
+        });
+    });
+});