Consumer groups have called for strong financial regulation of cryptocurrency markets and investments in Australia, saying crypto assets are “complex, volatile and high-risk products that can cause harm to Australian consumers.”

In a submission to the federal treasury’s consultation paper on cryptocurrency, consumer group Choice has urged the federal government to “strongly consider regulating all crypto assets under the existing financial product regulatory regime for better outcomes for consumers and the community”.

That includes all cryptocurrencies and other assets such as non-fungible tokens. A Choice survey found 12% of Australians have bought cryptocurrency, and 11% are interested in purchasing it. The survey found a majority of consumers say cryptocurrency trading should have strong protections, similar to trading on the stock market.

The most common reason people gave for investing in cryptocurrency was financial – viewing it as a long term investment. Those who were interested in investing but hadn’t yet done so cited fear of losing moneyand scams as the two biggest reasons for not following through.

Choice said obligations on secondary crypto asset service providers, such as wallets, exchanges and markets, need to be strengthened, and should mirror the Australian Securities and Investment Commission (Asic) obligations on financial services licensees.

Consumer protections against misleading and deceptive conduct and unfair contract terms under the Asic Act and Australian consumer law should also apply to these crypto providers, Choice said.

“Crypto assets are complex, volatile and high-risk products that can cause harm to Australian consumers,” Choice said in its submission. “Strong consumer protection laws are urgently needed to protect people from the significant harms.”

Choice pointed to various digital currency exchanges that market themselves to look like financial market exchanges, and said most consumers use the exchanges with the expectation they are financial products.

The consumer group said exchanges and providers should have obligations to protect consumers from scams on their platforms, noting that in 2021 the Australian Competition and Consumer Commission received 10,412 reports of crypto scams from consumers with losses totalling about $129m.

“[I had problems with] … this particular crypto trader [that] after many complaints refused to release my investment, then without warning closed my account & stole my $5,700!” one Choice member said in the submission. Another member reported losing $330,000 via a fake cryptocurrency investment platform, and then another $10,000 from another scam claiming to be able to help get the money back.

The Consumer Action Law Centre has called on the government to focus on protecting the most vulnerable from getting caught up in crypto investments, which the group likened to gambling. The centre said law restricting gambling advertising should be applied to cryptocurrency advertising.

“There is no reason crypto assets or [providers] should be marketing themselves toward anyone under 18,” the centre said.

“Moreover, we consider that there should be restrictions from mass marketing by these firms, given that crypto is high-risk and unsophisticated investors are at high risk of losing significant funds.”

The Consumer Action Law Centre said crypto advertising was already embedding itself in sporting codes and sponsoring teams and venues.

“Just like betting odds in sports becoming almost completely ingrained in sports programming, crypto’s current trend will likely result in speculative crypto assets being associated with sports teams, and ingrained in our psyche as an acceptable way to risk money,” the submission said. “The government’s failure to limit harms caused by the advertising of gambling doesn’t mean that the crypto industry should get a pass on what we allow them to do in terms of mass marketing, too.”

Submissions to the consultation ended last week. The treasury review of cryptocurrency was initiated by the former Coalition government. The Labor government has yet to outline what its policy on cryptocurrency will be. Guardian Australia has sought comment from the new treasurer, Jim Chalmers.

Commonwealth bank earlier this month paused its rollout of cryptocurrency trading through its banking app, in part citing the need for regulatory certainty amid turmoil in the cryptocurrency market that has seen massive declines in the value of currencies in the past month.