The UK Treasury Committee has called for consumer cryptocurrencies to be regulated in a similar way to gambling, due to the price volatility and intrinsic risk involved.

A new report by the cross-party committee of MPs said that cryptocurrencies such as Bitcoin have “no intrinsic value” and serve no useful social purpose. They need large amounts of energy and are used by criminals in scams and financial crimes.

The committee said it was concerned that if crypto trading is regulated by the government like other financial services, this will create a “halo effect” leading consumers to believe cryptocurrencies are safe when they are not.

According to HM Revenue & Customs, around 10 per cent of adults hold or have held crypto assets.

The committee said that the technology underpinning cryptocurrencies may have benefits for financial services, especially for cross-border transactions and payments, but added that regulators need to keep up with developments so that it can be “put to good use”.

The report recommends that the government should take a balanced approach to supporting the development of cryptoassets and the underlying technologies. Ministers should also avoid allocating public resources on projects which do not have a clear benefit, such as the Royal Mint’s abandoned non-fungible token (NFT) project, it said.

“The events of 2022 have highlighted the risks posed to consumers by the cryptoasset industry, large parts of which remain a wild west,” said Harriet Baldwin MP, chair of the treasury committee. “Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK’s financial services industry.”

She added: “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 committee’s report has been criticised by industry association CryptoUK. Commenting on the news Ian Taylor, board advisor at CryptoUK, said that the organisation was both concerned and disappointed by the claims that the crypto industry is similar to the gambling industry.

He added: “Professional investment managers see Bitcoin and other cryptoassets as a new alternative investment class – not as a form of gambling – and institutional adoption of unbacked crypto assets has increased significantly.”

“Furthermore, gambling is exempt from capital gains tax. Does the Government really wish to exclude tens of millions of pounds in tax income from gains made by the buying and selling of unbacked crypto assets?” Taylor said.

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