California Gov. Jerry Brown signed a bill Saturday that legalizes the use of Bitcoin and other digital currencies, reversing what backers called an outdated prohibition against use of alternative currencies.

The bill, dubbed AB 129, ensures that various forms of alternative currencies such as digital currencies, coupons, and points are legal for use to purchase goods and services in the state. The new law repeals a provision in existing state law that prohibits anything but US currency being used for commerce.

Democratic Assemblyman Roger Dickinson, the bill's author, said earlier this month that the new law reflects the growing popularity of alternative forms of currency.

"In an era of evolving payment methods, from Amazon Coins to Starbucks Stars, it is impractical to ignore the growing use of cash alternatives," Dickinson said a statement earlier this month. "This bill is intended to fine-tune current law to address Californians' payment habits in the mobile and digital fields."

The move should help smooth the sometimes rocky relationship Bitcoin has had with the state. The Bitcoin Foundation, a nonprofit devoted to promoting best practices for the virtual currency, was ordered last year to cease operations in California, or face hefty fines. The California Department of Financial Institutions, which oversees banks, credit unions, and other financial organizations operating in the state, accused the foundation of "engaging in the business of money transmission without a license or proper authorization."