The pair will invest 500 Bitcoin, which is currently worth around $24million (£17.3m), in the endowment fund named ₿trust.
“JAY-Z/@S_C_ and I are giving 500 BTC to a new endowment named ₿trust to fund #Bitcoin development, initially focused on teams in Africa & India. It‘ll be set up as a blind irrevocable trust, taking zero direction from us,” Mr Dorsey tweeted on Friday.
The Twitter CEO linked to an application form for the board of ₿trust, adding that the fund’s mission statement is to “make bitcoin the internet’s currency”.
Mr Dorsey did not provide any additional details on how the fund will work and what it is looking for in its board members.
The fund was launched as India’s government plans to implement a ban on Bitcoin in the country over the next few months.
Other cryptocurrencies will also be banned, as India’s central bank continues to develop its own digital currency for use in the country.
However, TechCrunch reported that Africa has seen a surge in use of cryptocurrencies, with Nigeria only second to the US in the volume of Bitcoin traded over the last five years.
Mr Dorsey is a longtime advocate of Bitcoin, and his payment platform company Square has accepted the cryptocurrency since 2014.
The CEO also announced investment in Bitcoin last week, while Twitter’s chief financial officer Ned Segal said that the social media platform is looking into paying its employees with the digital currency.
There has been a surge in investment in Bitcoin this week, with Tesla announcing on Monday that it has invested $1.5billion (£1.08bn) in the cryptocurrency and is exploring taking it as payment.