Ether and other coins surged on the news.
A top official at the US Securities and Exchange Commission said that ether - the native currency of the Ethereum network - is not a security according to federal guidelines. Crypto event in San Francisco Thursday, the official told the audience that the agency "doesn't see a lot of value in treating ether today as a security", explaining that the fact that there is no central figure or group responsible for ethereum, and therefore "the assets may not represent an investment contract".
Ether rose 11 percent to $519.88 at 2:17 p.m.in NY. It has fallen more than 60 percent since its peak in January.
Crypto enthusiasts have long anxious that the SEC would crack down on Ether, which was originally offered in 2014 by the Ethereum Foundation, a Swiss nonprofit.
The commission's policy is in line with what SEC Chair Jay Clayton said recently about bitcoin: that cryptocurrencies are not securities and the definition of "security" would not change to include bitcoin.
He also pushed back on the idea that there can be utility tokens which are not securities, saying "even digital assets with utility that function exclusively as a means of exchange in a decentralized network could be packaged and sold as an investment strategy that can be a security". President Chris Concannon said the SEC's decision could increase the chances that regulators will sign off on Ether futures.
"Can a digital asset originally sold in a securities offering eventually be sold in something other than a security?" he questioned. The CFTC allowed bitcoin futures to be traded past year on three exchanges. The only cryptocurrency larger than ether is bitcoin. Thursday's announcement was the first time the agency provided regulator clarity on specific coins.
Industry experts already believed Bitcoin to not be a security, however there was significant uncertainty over how the SEC would class Ethereum. XRP rose 8 percent to 56 cents.
For example if deemed a security, websites offering trading in the token would have required licenses from federal regulators.
Hinman appeared to contradict himself when he dove into an analysis of token sales likely falling under the blanket of securities, only to dismiss ether from this classification. And, while this speech is sure to quell the anxieties of enthusiasts and investors alike, it leaves a gray area open for the SEC to color in its treatment of each individual token and coin under Hinman's interpretation.