Nearly a year after first stating that tokens issued as part of initial coin offerings may be subject to securities law, a U.S. Securities and Exchange Commission official says traditional cryptocurrencies are not in fact securities.

The clarification comes from William Hinman, head of the division of corporation finance at the SEC. He told an audience at the Yahoo Finance All Markets Summit Thursday that “central to determining whether a security is being sold is how it is being sold and the reasonable expectations of purchasers.”

Hinman explained that cryptocurrencies such as bitcoin and Ethereum that are used strictly as currencies and are decentralized and not tied to an actual company are not securities. However, many tokens issued in ICOs are.

“Promoters, in order to raise money to develop networks on which digital assets will operate, often sell the tokens or coins rather than sell shares, issue notes or obtain bank financing,” Hinman said. “But, in many cases, the economic substance is the same as a conventional securities offering. Funds are raised with the expectation that the promoters will build their system and investors can earn a return on the instrument – usually by selling their tokens in the secondary market once the promoters create something of value with the proceeds and the value of the digital enterprise increases.”

That, Hinman said, means that they constitute a security under law and are subject to the same laws traditional share offerings are.

In some ways, Hinman has only restated what the SEC has said previously. But reading his full speech, it’s the first time an SEC official has gone into so much depth to explain where securities law does and does not apply. It’s also possibly the first time an SEC official has specifically addressed bitcoin in relation to securities law.

“When I look at bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise,” Hinman explained. “The network on which bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of bitcoin would seem to add little value.”

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