LONDON (Reuters) - Britain’s cryptocurrency market resembles the Wild West and should be regulated, lawmakers said on Wednesday, urging the government to bring to heel a sector plagued by volatile price swings, vulnerability to hacking and weak consumer protection.

FILE PHOTO: A cryptocurrency mining computer is seen in front of bitcoin logo during the annual Computex computer exhibition in Taipei, Taiwan June 5, 2018. REUTERS/Tyrone Siu/File Photo

The government’s current approach to the sector is vague and unsustainable, Parliament’s Treasury Committee said in a report, calling for regulation that protects consumers and prevents illicit uses such as money laundering.

Still, Britain could become a global center for cryptocurrencies with proportionate regulation, it said, adding that the government should weigh whether it would encourage growth in the sector against its numerous risks.

Cryptocurrencies are virtual tokens that can be used as forms of payments. They can also be traded on online exchanges, a usage that has become widespread.

Though the Financial Conduct Authority, Britain’s watchdog, has issued warnings against scams involving cryptocurrencies, the lack of a comprehensive set of rules drew strong criticism from the lawmakers.

“It’s unsustainable for the government and regulators to bumble along issuing feeble warnings to potential investors, yet refrain from acting,” said Nicky Morgan, the committee’s chair.

Extending existing laws to cover cryptocurrency exchanges and initial coin offerings would be the quickest way to give regulators oversight of the industry, the report said.

STRIKING A BALANCE

CryptoUK, an industry body, welcomed the recommendations.

The government should “introduce regulation that strikes the right balance between establishing safeguards and enabling the UK to become the global leader in crypto,” said Iqbal Gandham, its chair.

Cryptocurrencies saw a surge in interest last year, especially from individual investors. The price of bitcoin, the most well-known cryptocurrency, soared more than 1,300 percent in 2017 to approach a record high of almost $20,000 but has since slumped. It was trading on Tuesday around $6,370.

Policymakers across the world are wrestling with how to treat cryptocurrencies and their underlying blockchain technology, said by proponents to have the potential to transform industries such as finance and insurance.

Still, few major jurisdictions have looked in earnest at how to regulate digital money, despite a spate of thefts from exchanges and worries that cryptocurrencies enable criminality.

Japan last year became the first country to oversee cryptocurrency exchanges at the national level, aiming to tame an unruly sector and harness the industry’s growth potential. Others, including China and South Korea, have clamped down on cryptocurrencies.

In contrast, Western states have taken little concrete action. U.S. securities regulators have stepped up scrutiny, noting that cryptocurrencies could be seen as securities and as such subject to federal laws.

The European Union has so far avoided regulation because of the sector’s relatively small size, though a report prepared for the bloc this month said it should adopt common rules on cryptocurrencies.