In a new report, the committee called for consumer trading in unsecured crypto-assets to be treated in regulation as gambling.
The cross-party committee of MPs said cryptocurrencies such as Bitcoin are used by criminals in scams and money laundering.
Unbacked crypto-assets — often referred to as cryptocurrencies — are not backed by the underlying assets, the committee added.
They pose significant risks to consumers, given their price volatility and risk of losses, according to the MPs, who said unbacked crypto retail was more like gambling than a financial service and should be regulated as such.
The report states: "We urge the government to regulate retail and investment activities in unsecured crypto-assets as gambling rather than a financial service, in accordance with its stated principle of 'equal risk'. , same regulatory result "."
The committee pointed to figures from HM Revenue and Customs (HMRC) indicating that around 10% of UK adults hold or have held crypto-assets,
MEPs also said that potential productive innovation in financial services should not be unduly limited.
They said the technologies underlying crypto-assets can bring certain benefits to financial services, especially for cross-border transactions and payments in less developed countries.
A balanced approach must be taken to support the development of crypto-asset technologies, while avoiding spending public resources on projects with no clear and beneficial use, MEPs said.
Harriett Baldwin, chair of the Treasury committee, said: “The events of 2022 have highlighted the risks posed to consumers by the crypto-asset industry, much of which remains a wild west.
“Effective regulation is clearly needed to protect consumers from harm, as well as to support productive innovation in the UK financial services sector.
“However, with no intrinsic value, huge price volatility, and no discernible social good, consumer commerce in cryptocurrencies like Bitcoin is more like gambling than a financial service, and should be regulated as such.
"When betting on these unbacked 'tokens', consumers should be aware that all of their money could be lost."
The committee sees central bank digital currencies as a separate job.
A Treasury spokesperson said: “The risks posed by crypto are typical of those that exist in traditional financial services and it is financial services regulation – rather than gambling regulation – that has taken its toll. evidence to mitigate them.
"Crypto offers opportunity, but we're taking an agile approach to vigorously regulating the market, addressing the most pressing risks first in a way that fosters innovation."