Fidelity, Square, Coinbase Launch Bitcoin Trade Group

The council’s launch comes as prices of many digital assets have surged, drawing in new mainstream investors and the banks and brokers that serve them. Earlier this year, the total market value of bitcoin, the most popular digital currency, touched $1 trillion for the first time.

Still, the market’s future remains far from settled. Advocates have argued that cryptocurrencies and the blockchain technology that supports them have the potential to create jobs and extend financial services to consumers everywhere, at little or no cost. But policy makers and regulators around the world will play a critical role in shaping the path forward.

“Crypto is at a mainstream inflection point,” said

Fred Ehrsam,

co-founder of Paradigm and Coinbase’s former president. “It’s in its very early stages and, much like the internet (once was), it’s very fragile while it’s in that stage.”

The internet emerged as a major force in global commerce in part because of a handful of key policy decisions, including those that legalized data encryption and resolved questions over sales taxes, Mr. Ehrsam said. The nascent cryptocurrency market is sure to face its own crossroads, even if it isn’t yet obvious what they are, he said.

“It’s challenging because policy makers want to balance risk and reward, and even people who spend time in this space would struggle to predict where this will go in the coming decade,” he said. “It was very hard to say where the internet was going to go.”

The council plans to appoint a board that would include representatives with each of the four initial members. In time, Mr. Ehrsam said, the group will add an executive team.

Mr. Ehrsam and former Sequoia Capital partner

Matt Huang

founded Paradigm three years ago to invest in both cryptocurrencies and the companies that focus on that market.

Fidelity, an investing colossus with nearly $10 trillion in client assets under administration, opened in 2018 a custody business that stores and trades bitcoin for hedge funds and other professional investors. Last month, the Boston firm became the latest money manager to seek regulatory approval to launch an exchange-traded fund that tracks the price of bitcoin.

Square, an electronic-payments company, has been adding bitcoin to its corporate balance sheet. And the firm’s Cash App consumer-finance platform allows users to buy and sell the digital currency.

Coinbase, founded in 2012, is the largest U.S. cryptocurrency exchange. The company, which serves 43 million customers in 100 countries, plans to go public later this month.

Write to Justin Baer at justin.baer@wsj.com