Westminster’s cross-party Treasury Select Committee of lawmakers is to launch an inquiry into digital currencies.
The investigation will look at on the opportunities and risks to consumers, businesses and the government by the rising popularity of cryptocurrencies, the committee said in a statement.
Concerns have mounted over the past 12 months that cryptocurrencies have become primarily a vehicle for speculators rather than a functioning, alternative currency.
Wild fluctuations in valuation of various cryptocurrencies have seen some investors make fortunes while those who arrived late to the party making huge losses.
Bitcoin, the best known virtual currency, lost over half its value earlier this year after surging more than 1,300%.
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,” Nicky Morgan, chair of the Treasury Committee, said.
The select committee will take written and verbal evidence from a range of experts on the digital currencies, which will then inform a report it submits to the government containing recommendations on what to do.
The inquiry will consider whether the government is striking the right balance between protecting customers and businesses without stifling innovation.
The finance ministers of France and Germany recently called for the effects of cryptocurrencies to be placed on the agenda of the upcoming G20 meeting.
And earlier this week it was announced that US Congress is to investigate the rise of cryptocurrencies with a view to imposing greater government oversight.
There is growing call from both parties in both houses to take action.
Closer to home, Bank of England (BoE) Governor Mark Carney earlier this week claimed bitcoin has failed as a currency.
Speaking at a Regent´s University function in London, Carney said bitcoin had “pretty much failed thus far on…the traditional aspects of money.”
Citing its high volatility, the BoE governor pointed to signs that the cryptocurrency was not readily being used to buy goods and services in the way a conventional currency is nor was it a store of value in the way the major developed fiat currencies can be.
“It is not a store of value because it is all over the map. Nobody uses it as a medium of exchange,” said Carney.
Despite increasing government concerns across the world about how cryptocurrencies are evolving, the interest from consumers and developers remains high. Bitcoin has recovered 11.48% this week and its price stands at $10,708.