diff --git a/aries/aries_vcx/src/protocols/did_exchange/mod.rs b/aries/aries_vcx/src/protocols/did_exchange/mod.rs
index 770a3eda6d..71769b1408 100644
--- a/aries/aries_vcx/src/protocols/did_exchange/mod.rs
+++ b/aries/aries_vcx/src/protocols/did_exchange/mod.rs
@@ -1,17 +1,83 @@
 use std::sync::Arc;
 
+use did_doc::schema::{
+    did_doc::DidDocument,
+    verification_method::{VerificationMethod, VerificationMethodKind},
+};
+use did_parser::DidUrl;
 use did_resolver_registry::ResolverRegistry;
 use messages::msg_fields::protocols::out_of_band::invitation::{
     Invitation as OobInvitation, OobService,
 };
 use public_key::Key;
 
-use crate::errors::error::{AriesVcxError, AriesVcxErrorKind};
+use crate::errors::error::{AriesVcxError, AriesVcxErrorKind, VcxResult};
 
 pub mod state_machine;
 pub mod states;
 pub mod transition;
 
+fn resolve_verification_method(
+    did_doc: &DidDocument,
+    verification_method_ref: &DidUrl,
+) -> Result<VerificationMethod, AriesVcxError> {
+    let key = did_doc.verification_method().iter().find(|key_agreement| {
+        let reference_fragment = match verification_method_ref.fragment() {
+            None => {
+                warn!(
+                    "Fragment not found in verification method reference {}",
+                    verification_method_ref
+                );
+                return false;
+            }
+            Some(fragment) => fragment,
+        };
+        let key_agreement_fragment = match key_agreement.id().fragment() {
+            None => {
+                warn!(
+                    "Fragment not found in verification method {}",
+                    key_agreement.id()
+                );
+                return false;
+            }
+            Some(fragment) => fragment,
+        };
+        reference_fragment == key_agreement_fragment
+    });
+    match key {
+        None => Err(AriesVcxError::from_msg(
+            AriesVcxErrorKind::InvalidState,
+            format!(
+                "Verification method not found in resolved did document {}",
+                did_doc
+            ),
+        )),
+        Some(verification_method) => Ok(verification_method.clone()),
+    }
+}
+
+fn resolve_first_key_agreement(did_document: &DidDocument) -> VcxResult<VerificationMethod> {
+    // todo: did_document needs robust way to resolve this, I shouldn't care if there's reference or
+    // actual key in the key_agreement       Abstract the user from format/structure of the did
+    // document
+    let verification_method_kind = did_document.key_agreement().first().ok_or_else(|| {
+        AriesVcxError::from_msg(
+            AriesVcxErrorKind::InvalidState,
+            format!(
+                "No verification method found in resolved did document {}",
+                did_document
+            ),
+        )
+    })?;
+    let verification_method = match verification_method_kind {
+        VerificationMethodKind::Resolved(verification_method) => verification_method.clone(),
+        VerificationMethodKind::Resolvable(verification_method_ref) => {
+            resolve_verification_method(did_document, verification_method_ref)?
+        }
+    };
+    Ok(verification_method)
+}
+
 pub async fn resolve_enc_key_from_invitation(
     invitation: &OobInvitation,
     resolver_registry: &Arc<ResolverRegistry>,
@@ -37,17 +103,8 @@ pub async fn resolve_enc_key_from_invitation(
                 "resolve_enc_key_from_invitation >> Resolved did document {}",
                 output.did_document
             );
-            Ok(output
-                .did_document
-                .verification_method()
-                .first()
-                .ok_or_else(|| {
-                    AriesVcxError::from_msg(
-                        AriesVcxErrorKind::InvalidState,
-                        format!("No verification method found in resolved did document {}", &output.did_document),
-                    )
-                })?
-                .public_key()?)
+            let key = resolve_first_key_agreement(&output.did_document)?;
+            Ok(key.public_key()?)
         }
         OobService::AriesService(_service) => {
             unimplemented!("Embedded Aries Service not yet supported by did-exchange")
diff --git a/did_core/did_methods/did_resolver_sov/src/resolution/utils.rs b/did_core/did_methods/did_resolver_sov/src/resolution/utils.rs
index dc649059b7..eca2da3423 100644
--- a/did_core/did_methods/did_resolver_sov/src/resolution/utils.rs
+++ b/did_core/did_methods/did_resolver_sov/src/resolution/utils.rs
@@ -7,7 +7,7 @@ use did_resolver::{
         utils::OneOrList,
         verification_method::{VerificationMethod, VerificationMethodType},
     },
-    did_parser::Did,
+    did_parser::{Did, DidUrl},
     shared_types::did_document_metadata::DidDocumentMetadata,
     traits::resolvable::{
         resolution_metadata::DidResolutionMetadata, resolution_output::DidResolutionOutput,
@@ -96,7 +96,7 @@ pub(super) async fn ledger_response_to_ddo(
 
     // TODO: Use multibase instead of base58
     let verification_method = VerificationMethod::builder(
-        did.to_string().try_into()?,
+        DidUrl::parse("#1".to_string())?,
         did.to_string().try_into()?,
         VerificationMethodType::Ed25519VerificationKey2018,
     )
@@ -106,6 +106,7 @@ pub(super) async fn ledger_response_to_ddo(
     let ddo = DidDocument::builder(ddo_id)
         .add_service(service)
         .add_verification_method(verification_method)
+        .add_key_agreement_reference(DidUrl::parse("#1".to_string())?)
         .build();
 
     let ddo_metadata = {