Wall Street is putting more money behind a technology it once dismissed as a fad.

Some of the biggest companies in the financial sector have invested $30 million in Chain Inc., a San Francisco-based company that works with banks and other institutions to develop ways to trade and transfer financial assets using the system that underpins the virtual currency Bitcoin.

Investors include Visa Inc., Nasdaq Inc., Citi Ventures, Capital One Financial Corp., Fiserv Inc. and Orange SA.

A valuation for Chain wasn't disclosed as part of the fundraising round, which Chain announced on Wednesday. The company also said former American Express Co. CEO and venture capitalist Jim Robinson III has joined its board.

The investment is the latest sign of Wall Street's about-face with Bitcoin, which banks and other financial firms initially said was unlikely to transform commerce. These financial companies don't have any interest in using the actual currency. But they see the "blockchain" technology that lets Bitcoin users instantaneously make and record transactions as a potential replacement for what they say is a cumbersome, costly and less-secure process.

Vast bureaucracies exist inside banks and at third-party firms to verify and process the buying and selling of everything from foreign currencies to stocks.

The blockchain is a record of every transaction ever made using Bitcoin. But rather than being held in a central database or institution, it is spread out over a network of independent computers and verified continuously by participants in the network instead of a central authority. Other blockchains have been created unrelated to Bitcoin.

Its proponents say the technology might make it possible for a stock or other asset to change owners in the blink of an eye, instead of the roughly three days and several steps of intermediaries it takes now.

While the technology is gaining popularity among many on Wall Street, it could take years before a critical mass of financial institutions agree to throw their weight behind a new protocol for processing and clearing transactions.

There are also questions about whether blockchains can be secure enough to handle a huge influx of sensitive transactions and how easily legacy financial institutions could start making such a radical change to the way they operate.

"We believe in the power of blockchain technology to transform how financial assets are transferred, but it has to be done with the right partners to insure it gets off the ground," said Adam Ludwin, CEO of Chain, in an interview.

The company is working with Nasdaq on using the technology to facilitate the trading of stakes in unlisted companies on its private market, but Nasdaq is able to set that up without cooperation from other institutions.

To change something bigger, such as how stocks or corporate bonds are transferred among investors, will require broad agreements from across the financial sector.

"The devil is in the details," said Houman Shadab, a law professor at New York Law School who studies blockchains. "There's a lot of work to do in building a consensus on how to do it and migrating existing technologies onto a new and untested platform."

Chain is among a handful of startups vying to dominate the new field of blockchain technology for Wall Street. Other contenders are New York-based Digital Asset Holdings LLC, headed by former J.P. Morgan & Chase Co. executive Blythe Masters, and San Francisco-based Ripple Labs Inc.

The growing challenge in securely moving assets around the globe is reminiscent of another major event in the markets, the Paperwork Crisis of 1968, according to some industry experts.

At that time, transactions were settled with the delivery of physical certificates. But the volume of trading had risen so quickly that firms were awash in paper. The situation got so bad that the New York Stock Exchange had to reduce trading to four days a week.

To help solve the problem, brokers and exchanges helped create what is now called the Depository Trust & Clearing Corp., a central body that facilitates clearing and settlement for the financial markets. The DTCC says today it clears more than $1.6 quadrillion of transactions a year.

Many of the processes at the heart of the financial system, including some at the DTCC, were built around how to automate paper-based transactions.

"Those processes that came after the paperwork crisis were better, but there is a need now for a more elegant and better solution," said Hans Morris, a former president of Visa who runs a financial technology investment firm Nyca Partners. Nyca has agreed to make an investment in another blockchain company called Clearmatics Technologies Ltd. in the U.K.

Rob Palatnick, chief technology architect of the DTCC, said the appeal of blockchain is its use of cryptography, which he says increases security of transactions and could streamline some of the legacy systems of Wall Street.

"The technology does provide answers to some of the fundamental problems of the financial sector," he said.

The DTCC itself is exploring blockchain technologies and is planning to launch its first pilot project by the end of the year.

"It feels like everything else in the world has gone digital, except money and assets," said Mr. Ludwin of Chain. "That's changing one way or another."

Write to Bradley Hope at bradley.hope@wsj.com

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(END) Dow Jones Newswires

September 09, 2015 16:25 ET (20:25 GMT)