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It would be easy, upon reading head headlines and lead-ins such as this, to believe that Goldman Sachs had invested $50 million in Bitcoin. Indeed, based on anecdotal evidence, it seems that many people with a passing interest in the digital currency have concluded just that. Several people who know that I write on the subject made comments to that effect over the weekend. Let’s not get carried away, though, this is not as significant as many have made it sound.

Firstly, as more detailed coverage such as this NY Times article makes clear, Goldman did not invest $50 million. The funding was provided by a group led by the Wall Street investment bank and the Chinese investment firm IDG Capital Partners and included other venture capital concerns, many with a history of investing in Bitcoin related ventures.

Secondly, the investment was not in Bitcoin, the currency, but in Circle, a company whose mission seems to be to take the Bitcoin out of the blockchain; interestingly, even the "about" page of the company's website makes no mention of Bitcoin. Circle is focused on providing the benefits of blockchain technology to enhance global payments, while absorbing the risk that volatility poses to consumers using Bitcoin. That is a worthy aim with enormous potential as a business model, but saying that somebody investing in it is investing in Bitcoin is simply not true.

It is also worth bearing in mind that last month Goldman reported first quarter profits of $2.8 billion. Their portion of the $50 million provided to Circle is, in that light, hardly a major investment for the bank. It looks to be more like a small hedge against the possibility that this new-fangled technology will actually take off. Nor does it represent a major shift in Goldman’s thinking; that came a month ago, when Goldman issued a report acknowledging that Bitcoin could “shape the future of finance.”

With all of that in mind, Goldman’s involvement in this round of funding for Circle is perfectly logical, but not particularly significant. The fact is, though, that it has taken on significance beyond its relevance as a business transaction. To many it is a vote of confidence in Bitcoin, but to many others, it is yet another sign that Wall Street’s opposition to digital currencies has progressed to another level.

Big business usually deals with challenges to the status quo in a certain way: First they attempt to ignore them, then they ridicule and attempt to destroy them, and finally, if they still refuse to go away, they simply buy them. Goldman, it seems has rushed through all of these stages with reference to Bitcoin. Just over a year ago, they stopped ignoring digital currency and moved into ridicule and attack mode, publishing this report [PDF] that recognized the potential of the underlying technology, but concluded that Bitcoin was “...not a currency...” A strange conclusion given that it is a medium of exchange. In many ways that is consistent with their investment last week, but I doubt that back then anybody reading that report would have anticipated an outside investment in that technology a year later.

The fact that Goldman is part of a consortium that has provided funding to Circle, then, is newsworthy, but we should be careful not to read too much into it. It is natural for them, and other large global banks, to attempt to separate out the payment system at the heart of Bitcoin from the currency itself and to seek control of what could pose a threat to the system from which they profit so hugely. Investing in Circle just looks like the first step in that process.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.