A committee of MPs has launched an inquiry into digital currencies.
The Treasury select committee will look into the opportunities and risks that digital currencies present to consumers, businesses, and the government.
It will also examine the regulatory response to the growth of digital currencies.
Nicky Morgan, chairman of the Treasury select committee, said: "People are becoming increasingly aware of cryptocurrencies such as bitcoin, but they may not be aware that they are currently unregulated in the UK, and that there is no protection for individual investors.
"The Treasury committee will look at the potential risks that digital currencies could generate for consumers, businesses, and governments, including those relating to volatility, money laundering, and cyber-crime.
"We will also examine the potential benefits of cryptocurrencies and the technology underpinning them, how they can create innovative opportunities, and to what extent they could disrupt the economy and replace traditional means of payment.
"Striking the right balance between regulating digital currencies to provide adequate protection for consumers and businesses, whilst not stifling innovation, is crucial. As part of the inquiry, we will explore how this can be achieved."
Among the questions the committee will seek to answer is whether digital currencies are ultimately capable of replacing traditional means of payment, to what extent could digital currencies disrupt the economy and what the tax implications of a wider adoption of digital currencies are.
In recent months there has been a surge in the number of initial coin offerings, where issuers accept a cryptocurrency, like bitcoin or ether, in exchange for another one related to a specific firm or project.
The FCA said the digital token may represent a share in a firm, a prepayment voucher for future services or it may have no discernible value at all.
In September the FCA issued a warning saying investors in these products should be prepared to lose all their money.
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damian.fantato@ft.com
