It warned that cryptocurrencies pose significant risks to consumers.

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.

It said that retail trading in unbacked crypto more closely resembles gambling than a financial service.

The committee is also concerned that regulating consumer crypto trading as a financial service – as proposed by the Government – will create a ‘halo’ effect, leading consumers to believe this activity is safe and protected, when it is not.

Unbacked cryptoassets – often called cryptocurrencies – are not supported by any underlying asset, the report said.

Around 10% of UK adults hold or have held cryptoassets, according to HMRC.

The MPs conceded that the technologies underlying cryptoassets may bring benefits to financial services, particularly for cross-border transactions and payments in less developed countries.

But they said that given that the future benefits of crypto remain unclear, the government should take a balanced approach to supporting the development of cryptoasset technologies and avoid spending public resources on projects without a clear, beneficial use, as appears to have been the case with its now-abandoned Royal Mint non-fungible token (NFT).

The committee said it is not the Government’s role to promote particular technological innovations for their own sake.

Harriett Baldwin MP, chair of the Treasury Committee, said: “The events of 2022 have highlighted the risks posed to consumers by the cryptoasset 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.

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