The committee underscored in a report that unbacked cryptoassets like Bitcoin, which make up two-thirds of all cryptocurrencies, hold no intrinsic value, consume large amounts of energy and are often used for illicit activities such as scams, fraud and money laundering.

Citing their high price volatility and risk of losses, the committee stated that these cryptocurrencies pose significant threats to consumers. The MPs expressed concerns that if regulated as a financial service, as proposed by the Government, it might create a misleading sense of safety among consumers. HM Revenue & Customs data shows that around 10% of UK adults hold or have held cryptoassets.

While the committee acknowledged potential benefits of the technology underpinning cryptocurrencies for financial services, especially for cross-border transactions and payments in less developed countries, they recommended a balanced approach towards supporting cryptoasset technologies.

This includes avoiding spending public resources on projects without a clear beneficial use, referring to the recently abandoned Royal Mint non-fungible token (NFT) project as an example.

Harriett Baldwin MP, chair of the Treasury Committee, highlighted the consumer risks within the largely unregulated cryptoasset industry, “parts of which remain a wild west”.

Ms Baldwin said: “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.

“However, with no intrinsic value, huge price volatility and no discernible social good, consumer trading of cryptocurrencies like Bitcoin more closely resembles gambling than a financial service, and should be regulated as such.

“By betting on these unbacked ‘tokens’, consumers should be aware that all their money could be lost.”

The Treasury Committee’s report emphasised that it is crucial for the government and regulators to keep pace with developments and ensure an open and effective Financial Conduct Authority authorisations gateway. While supporting financial innovation with potential benefits, the report noted that the extent of the benefits cryptoasset technologies might bring remains unclear.

The committee is considering central bank digital currencies as a separate piece of work.