In a new report, the cross-party Committee of MPs said that cryptocurrencies such as Bitcoin have “no intrinsic value and serve no useful social purpose”, while consuming large amounts of energy and being used by criminals in scams, fraud and money laundering.

Researchers estimated that that in 2020, Bitcoin mining used 75.4 terawatt hours of electricity (TWh) – higher electricity usage than Austria (69.9TWh) or Portugal (48.4TWh) in the same year.

The Committee also said that cryptocurrencies pose “significant risks to consumers” given their price volatility and the potential for major losses. Considering this, retail trading more closely resembles gambling than a financial service, the report said.

In February, the government published a set of proposals designed to protect consumers from the risks associated with crypto assets. This includes regulating the industry and efforts to rein in reckless business practices that characterise some of the organisations within it.

But the Committee expressed concern that regulating consumer crypto trading as a financial service will create a “halo” effect, leading consumers to believe this activity is safe and protected, when it is not.

Around 10 per cent of UK adults hold or have held crypto assets, according to HM Revenue & Customs.

Despite the criticisms, the MPs recognised that some of the technologies underlying crypto assets may bring benefits to financial services, particularly for cross-border transactions and payments in less-developed countries. They therefore called on the government and regulators to keep pace with developments so innovation is not stifled.

Harriett Baldwin MP, Treasury Committee chair, said: “The events of 2022 have highlighted the risks posed to consumers by the crypto asset industry, large parts of which remain a wild west. 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.”

In February, the Bank of England introduced a consultation on potentially introducing a “digital pound” which would be based on some technologies used by cryptocurrencies.