The Easy ID app helps shoppers verify their identity and age online and in stores.
But it will also be used to verify customers of exchange Swarm Markets, which offers access to volatile and unregulated crypto-currencies such as ethereum and bitcoin.
The Financial Conduct Authority (FCA) has repeatedly warned of the dangers of buying digital currency, telling investors to be prepared to lose all their money.
The value of bitcoin plummeted 10 per cent in just one day this week. It saw half its value wiped off in three months after hitting an all-time high in April.
Customers cannot buy crypto-currency using the app itself and the Post Office does not receive any commission. But the app approves users who want to trade crypto through Swarm Markets.
But one industry insider said: 'This falls between the cracks of regulation but still manages to tarnish the brand of Post Office. You have to assume that there are a number of people in Post Office Money currently banging their heads on their desks wondering how this has ever been allowed to happen.' Stock market experts have warned that the crypto-currency boom is a bubble that will cost investors dearly because the digital assets have no intrinsic value.
FCA chairman Charles Randell last week criticised celebrities and social media 'influencers' such as Kim Kardashian for fuelling the 'delusions of quick riches'.
A Post Office spokesman last night said: 'Access to products and services are increasingly moving online and we've responded to this shift by launching our free to use app, Post Office Easy ID, allowing people to build their own secure digital identity on their smartphone and enabling them to easily control and prove who they are to whichever business they want to interact with.'
Philipp Pieper, co-founder of Swarm Markets, said: 'By making it easy and safe to buy real bitcoin and ethereum, more people now have the option to get started in crypto.'