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Investing in cryptocurrency is no different to gambling and should be regulated as such, MPs have demanded.
The Treasury Select Committee said cryptocurrencies pose significant risks to consumers because of their volatile prices and the risk of losses.
In a report, MPs said regulating consumer crypto as a financial service – as proposed by the Government – could lead consumers to believe they are safe and protected when they are not.
They said experts have called for levies to be added to speculative activity in cryptocurrencies to support debt advice and addiction services.
The report said tougher controls could clamp down on investors getting misinformed by crypto companies, especially on social media platforms.
As many as four in five investors in Bitcoin between 2015 to 2022 were likely to have lost money, according to cited research by the Bank for International Settlements.
Several high-profile crypto companies failed in 2022, including the FTX cryptocurrency exchange.
MPs pointed out that gambling is regulated by its own body – the Gambling Commission – which provides advice and guidance to individuals and businesses, including on the prevention of problem gambling, and applies safeguards such as anti-money laundering and counter terrorist finance checks.
The FCA said 85pc of cryptoasset firms applying for registration under the FCA’s Anti-Money Laundering and Counter Terrorist Finance regime were rejected.
Harriet Baldwin, chairman of the Treasury Select Committee, said large parts of the cryptoasset industry were still a “wild west”.
She 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.”
MPs said public resources should not be used to support cryptoasset activities without a clear, beneficial reason, criticising the release of the Royal Mint NFT.
The Government had asked the Royal Mint to produce an “NFT for Britain” as part of its goals to “make the UK a global hub for crypto-asset technology and investment”.
But MPs said it was not the Government’s role to promote particular technological innovations for their own sake.
Around 10pc of adults in the UK hold or have held cryptoassets, according to HM Revenue & Customs.