The world's second largest cryptocurrency spiked Thursday after a key Securities and Exchange Commission official made it clear that in the eyes of the agency, it's not a security.

The digital currency ether rose 8.8 percent to a high of $520.68, according to CoinDesk. Its price has struggled along with other cryptocurrencies this year, and has dropped about 35 percent since January.

While SEC leaders have publicly labeled bitcoin as a commodity, this is the first clear statement by the financial watchdog on how they plan to regulate ether.

"We don't see a lot of value in seeing ether as a security," William Hinman, head of the Division of Corporate Finance for the SEC, said at the Yahoo All Markets Summit: Crypto conference in San Francisco. "Ether is a coin that is evolving."

Hinman cited the cryptocurrency's decentralized and public network, and lack of a third party expecting to make a profit as reasons that the agency won't treat it like a security.

"In case of Ether as we interact with market participants, we keep gathering info and at some point we say this is something we should make clearer," he said.

Ether's one-day performance

Source: CoinDesk

The digital currency, which has a market value of $50.39 billion according to CoinDesk, is backed by the company Ethereum. It has often been described as "fuel" or "gas" to power the Ethereum network, a blockchain platform aimed at "smart contracts." Ethereum has become a popular platform for developers using blockchain.

A consortium called the Enterprise Ethereum Alliance for example, which includes companies like Microsoft and JP Morgan, is using the Ethereum blockchain to build applications.

Hinman did not categorize other cryptocurrencies, which are having the same identity crisis with regulators.

The cryptocurrency XRP is the subject of a lawsuit alleging that it is a security. Ripple is the name of the San Francisco-based company developing a network for faster global financial payments, while XRP is the name of the digital token that financial institutions on the network can use to transact quickly. Executives from Ripple have said without a doubt, XRP is not a security.

The agency will look at other cryptocurrencies on a case-by-case basis, Hinman said. Moving too quickly in search of a label could cause the agency to miss key facts and circumstances, which can vary dramatically depending on the cryptocurrency, he said.

"We don't think establishing a lot of bright lines is helpful," Hinman said. "We don't want to react too quickly, we do want to protect investors but not stifle innovation."