diff --git a/CHANGELOG.md b/CHANGELOG.md
index 9bfb1a5723e5..7f30ec5d3ad2 100644
--- a/CHANGELOG.md
+++ b/CHANGELOG.md
@@ -213,6 +213,7 @@ Ref: https://keepachangelog.com/en/1.0.0/
 
 ### Bug Fixes
 
+* [\#11772](https://github.com/cosmos/cosmos-sdk/pull/11772) Limit types.Dec length to avoid overflow
 * [\#11724](https://github.com/cosmos/cosmos-sdk/pull/11724) Fix data race issues with api.Server
 * [\#11693](https://github.com/cosmos/cosmos-sdk/pull/11693) Add validation for gentx cmd.
 * [\#11645](https://github.com/cosmos/cosmos-sdk/pull/11645) Fix `--home` flag ignored when running help.
diff --git a/types/coin_test.go b/types/coin_test.go
index 64a39c813e09..83c12143078e 100644
--- a/types/coin_test.go
+++ b/types/coin_test.go
@@ -801,6 +801,7 @@ func (s *coinTestSuite) TestParseCoins() {
 		{"10atom10", true, sdk.Coins{{"atom10", sdk.NewInt(10)}}},
 		{"200transfer/channelToA/uatom", true, sdk.Coins{{"transfer/channelToA/uatom", sdk.NewInt(200)}}},
 		{"50ibc/7F1D3FCF4AE79E1554D670D1AD949A9BA4E4A3C76C63093E17E446A46061A7A2", true, sdk.Coins{{"ibc/7F1D3FCF4AE79E1554D670D1AD949A9BA4E4A3C76C63093E17E446A46061A7A2", sdk.NewInt(50)}}},
+		{"120000000000000000000000000000000000000000000000000000000000000000000000000000btc", false, nil},
 	}
 
 	for tcIndex, tc := range cases {
diff --git a/types/decimal.go b/types/decimal.go
index f7d7ad9ffe66..3be55863c068 100644
--- a/types/decimal.go
+++ b/types/decimal.go
@@ -22,11 +22,16 @@ const (
 	// number of decimal places
 	Precision = 18
 
-	// bytes required to represent the above precision
-	// Ceiling[Log2[999 999 999 999 999 999]]
+	// bits required to represent the above precision
+	// Ceiling[Log2[10^Precision - 1]]
 	DecimalPrecisionBits = 60
 
-	maxDecBitLen = maxBitLen + DecimalPrecisionBits
+	// decimalTruncateBits is the minimum number of bits removed
+	// by a truncate operation. It is equal to
+	// Floor[Log2[10^Precision - 1]].
+	decimalTruncateBits = DecimalPrecisionBits - 1
+
+	maxDecBitLen = maxBitLen + decimalTruncateBits
 
 	// max number of iterations in ApproxRoot function
 	maxApproxRootIterations = 100
diff --git a/types/decimal_test.go b/types/decimal_test.go
index 742edb60c1e0..684888b49363 100644
--- a/types/decimal_test.go
+++ b/types/decimal_test.go
@@ -5,6 +5,7 @@ import (
 	"encoding/json"
 	"fmt"
 	"math/big"
+	"strings"
 	"testing"
 
 	"github.com/stretchr/testify/require"
@@ -57,10 +58,10 @@ func (s *decimalTestSuite) TestNewDecFromStr() {
 	largeBigInt, ok := new(big.Int).SetString("3144605511029693144278234343371835", 10)
 	s.Require().True(ok)
 
-	largerBigInt, ok := new(big.Int).SetString("88888888888888888888888888888888888888888888888888888888888888888888844444440", 10)
+	largerBigInt, ok := new(big.Int).SetString("8888888888888888888888888888888888888888888888888888888888888888888844444440", 10)
 	s.Require().True(ok)
 
-	largestBigInt, ok := new(big.Int).SetString("133499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
+	largestBigInt, ok := new(big.Int).SetString("33499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
 	s.Require().True(ok)
 
 	tests := []struct {
@@ -87,8 +88,8 @@ func (s *decimalTestSuite) TestNewDecFromStr() {
 		{"foobar", true, sdk.Dec{}},
 		{"0.foobar", true, sdk.Dec{}},
 		{"0.foobar.", true, sdk.Dec{}},
-		{"88888888888888888888888888888888888888888888888888888888888888888888844444440", false, sdk.NewDecFromBigInt(largerBigInt)},
-		{"133499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535", false, sdk.NewDecFromBigIntWithPrec(largestBigInt, 18)},
+		{"8888888888888888888888888888888888888888888888888888888888888888888844444440", false, sdk.NewDecFromBigInt(largerBigInt)},
+		{"33499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535", false, sdk.NewDecFromBigIntWithPrec(largestBigInt, 18)},
 		{"133499189745056880149688856635597007162669032647290798121690100488888732861291", true, sdk.Dec{}},
 	}
 
@@ -480,10 +481,14 @@ func (s *decimalTestSuite) TestDecSortableBytes() {
 }
 
 func (s *decimalTestSuite) TestDecEncoding() {
-	largestBigInt, ok := new(big.Int).SetString("133499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
+	largestBigInt, ok := new(big.Int).SetString("33499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
 	s.Require().True(ok)
 
-	smallestBigInt, ok := new(big.Int).SetString("-133499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
+	smallestBigInt, ok := new(big.Int).SetString("-33499189745056880149688856635597007162669032647290798121690100488888732861290034376435130433535", 10)
+	s.Require().True(ok)
+
+	const maxDecBitLen = 315
+	maxInt, ok := new(big.Int).SetString(strings.Repeat("1", maxDecBitLen), 2)
 	s.Require().True(ok)
 
 	testCases := []struct {
@@ -523,15 +528,21 @@ func (s *decimalTestSuite) TestDecEncoding() {
 		},
 		{
 			sdk.NewDecFromBigIntWithPrec(largestBigInt, 18),
-			"313333343939313839373435303536383830313439363838383536363335353937303037313632363639303332363437323930373938313231363930313030343838383838373332383631323930303334333736343335313330343333353335",
-			"\"133499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"",
-			"\"133499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"\n",
+			"3333343939313839373435303536383830313439363838383536363335353937303037313632363639303332363437323930373938313231363930313030343838383838373332383631323930303334333736343335313330343333353335",
+			"\"33499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"",
+			"\"33499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"\n",
 		},
 		{
 			sdk.NewDecFromBigIntWithPrec(smallestBigInt, 18),
-			"2D313333343939313839373435303536383830313439363838383536363335353937303037313632363639303332363437323930373938313231363930313030343838383838373332383631323930303334333736343335313330343333353335",
-			"\"-133499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"",
-			"\"-133499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"\n",
+			"2D3333343939313839373435303536383830313439363838383536363335353937303037313632363639303332363437323930373938313231363930313030343838383838373332383631323930303334333736343335313330343333353335",
+			"\"-33499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"",
+			"\"-33499189745056880149688856635597007162669032647290798121690100488888732861290.034376435130433535\"\n",
+		},
+		{
+			sdk.NewDecFromBigIntWithPrec(maxInt, 18),
+			"3636373439353934383732353238343430303734383434343238333137373938353033353831333334353136333233363435333939303630383435303530323434343434333636343330363435303137313838323137353635323136373637",
+			"\"66749594872528440074844428317798503581334516323645399060845050244444366430645.017188217565216767\"",
+			"\"66749594872528440074844428317798503581334516323645399060845050244444366430645.017188217565216767\"\n",
 		},
 	}