Move would make it the first big Wall Street firm to deal directly in the growing yet controversial cryptocurrency market.

Goldman Sachs Group Inc. GS 0.40% is weighing a new trading operation dedicated to bitcoin and other digital currencies, the first blue-chip Wall Street firm preparing to deal directly in this burgeoning yet controversial market, according to people familiar with the matter. Goldman’s effort is in its early stages and may not proceed, the people said. The firm’s interest, though, could boost bitcoin’s standing among investors and fuel the debate around digital currencies, which were initially viewed as havens for illicit activity but are pushing further into the mainstream investment world. China in recent weeks has banned exchanges that trade bitcoin, fearing the virtual currency could provide an avenue for capital flight. J.P. Morgan Chase & Co. Chief Executive James Dimon, whose bank is the largest dealer in global currencies, last month called bitcoin a “fraud” and said he would fire any employee who traded it. Yet Japan’s government has embraced bitcoin, creating regulations to legitimize its trading. India and Sweden have mused about creating their own virtual currencies, and the U.S. Federal Reserve has studied bitcoin and the technology underpinning it.

“In response to client interest in digital currencies, we are exploring how best to serve them in this space,” a Goldman spokeswoman said.

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