The case has been withdrawn against a BNP candidate for the Welsh assembly election who had been accused of being filmed burning a copy of the Koran.
Sion Owens, aged 41, was charged with a public order offence on Saturday.
When he appeared at Swansea Magistrates Court the Crown Prosecution Service (CPS) said it was withdrawing the case against him.
But it said that investigations would continue and that "almost certainly other proceedings will ensue."
Mr Owens, from Bonymaen, Swansea, appeared in court from custody.
A BNP candidate for the South Wales West regional list, he was arrested on Friday evening when the force was passed a video recording showing a man burning the Koran.
He was charged on Saturday evening under the Public Order Act.
Joanne Shannon, another BNP candidate also arrested in connection with the incident, had already been released on police bail.
A BNP spokesperson said both would still be candidates in the assembly election on 5 May.
'A file of evidence'
CPS prosecutor Bryn Hurford told Mr Owens to be in "no doubt" that investigations into his actions were continuing and that "almost certainly other proceedings will ensue."
Speaking outside the court, Mr Owens solicitor, Rachel Elimelech, said he was "pleased" and "very relieved to be released from custody".
Later, a joint statement by the CPS and South Wales Police, said: "The current charge has been withdrawn by the Crown Prosecution Service to allow enquiries to continue.
"Withdrawal of this charge does not necessarily mean that no proceedings will follow. Once these enquiries are complete, South Wales Police will submit a file of evidence to the CPS for charging advice.
"A 44-year-old woman who was also arrested on Friday remains on police bail pending further enquiries."