The top securities regulator in the United States says that bitcoin is not a security under federal law.

Speaking on Thursday in a hearing before a House Appropriations subcommittee, Securities and Exchange Committee (SEC) Chairman Jay Clayton told lawmakers that cryptocurrencies which function exclusively as mediums of exchange are not securities, unlike initial coin offering (ICO) tokens, which are.

He said:

“It’s a complicated area. Because, as you said, there are different types of cryptoassets. Let me try and divide them into two areas. A pure medium of exchange, the one that’s most often cited, is Bitcoin. As a replacement for currency, that has been determined by most people to not be a security.”

“Then there are tokens, which are used to finance projects. I’ve been on the record saying there are very few, there’s none that I’ve seen, tokens that aren’t securities,” Clayton added. “To the extent something is a security, we should regulate it as a security, and our securities regulations are disclosure-based, and people should follow those and provide the information that we require.”

Clayton’s comments are consistent with statements that he has made in the past regarding the difference between “pure” cryptocurrencies like bitcoin and tokens, which the SEC says fall under US securities regulations.

Recently, a group of Silicon Valley heavyweights met with the SEC to attempt to convince them to provide safe harbor to most ICO tokens — as well as ethereum — but the agency is said to have not been overly receptive to the proposal.

That ethereum was on the agenda turned many heads, as it is the second-largest cryptocurrency and has been assumed by many ordinary users to be exempt from securities regulations.

However, as many newer users may not realize, the ethereum’s initial development was funded through a presale in 2014, though new units of ether have been distributed through mining since the network officially launched and will eventually be issued through a Proof-of-Stake (PoS) consensus algorithm.

For this reason, former markets regulator Gary Gensler argued earlier this week that ethereum is likely a “noncompliant security.”

However, Gensler — who chaired the Commodity Futures Trading Commission (SEC) during the Obama administration and now lectures on blockchain technology at MIT — said that ethereum was perhaps more likely than XRP to receive safe harbor from regulators, since ETH distribution has become decentralized over the previous three years while XRP issuance is controlled solely by a single entity: San Francisco-based company Ripple.

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