A Californian law has removed a ban on using currencies other than the US dollar.
The new law will allow for the growing use of alternative payment methods such as bitcoin.
Signed by state Governor Jerry Brown, the new law will boost confidence around bitcoin, as regulators and tax authorities worldwide examine how to handle it.
For years Section 107 of California's Corporations Code has prohibited companies or individuals from issuing money other than US dollars.
The bill was introduced by Assembly Member Roger Dickinson who said that digital currencies, community currencies and reward points were technically in violation of the law but not penalized.
In March, the US Internal Revenue Service said it will treat bitcoin as a form of property for tax purposes, rather than as currency, making it subject to similar rules as stocks and barter transactions.
Those receiving goods and services in bitcoin will have to add the value of the virtual currency at the time it was received into their gross income.
In the UK, HM Revenue & Custom said exchanging or mining bitcoins was exempt from value added tax (VAT) in the UK, but accepting the virtual currency for goods and services is subject to it.