(Kitco News) - For many investors gold’s biggest problem is that the precious metal does not provide a yield. However, one Nevada lawmaker is hoping to change that.

Jim Marchant Nevada State Assemblyman

Earlier this month, Nevada Assemblyman Jim Marchant introduced legislation, proposing to create a Nevada gold bond that offers a yield in physical gold.

“The idea behind this bill is to promote the idea of honest money,” he said in an interview with Kitco News. “Our currency loses 2% of its value and its purchasing power every year and I see that as a problem. I see my constituents investing in paper-backed Nevada bonds losing money and I want to help them get out of this hole,” he said.

Marchant explained because of Nevada’s rich gold deposit, the state is in the perfect position to create these yield-bearing precious metal bonds. According to state officials, Nevada was the top gold-producing state in the U.S. and was fifth in worldwide production.

Government statistics reported that 5.64 million ounces of gold were produced in Nevada last year, up 3.2% from 2016. Marchant said that the state currently collects hundreds of millions of dollars in taxes from gold miners.

He explained that his legislation would make it possible for Nevada to raise the gold offered in the proposed bonds by allowing mining companies to pay their taxes in physical gold.

Merchant added that not only will investors have access to yield-generating hard-assets but the state will also be able to reduce its sizeable debt. He explained that the government has about $11 billion in outstanding state bonds and he has proposed investors be able to redeem their paper bonds for gold bonds.

“This legislation would significantly reduce our debt obligations,” he said.

While the bill has been introduced, debate in the Legislature would begin at the earliest in February, when the new session starts. Merchant said that he hopes to have the bill signed into law by July 2019.

While Nevada is the first state in the U.S. to introduce this kind of legislation, it was not the first to look at the issue. Two years ago the Arizona government convened a committee to look at the issue.

Keith Weiner, CEO of Monetary Metals, has been a significant driving force behind the gold bonds. The company already offers fixed income products that offer a yield in gold.

In an interview with Kitco News, Weiner said that the gold market needs to see this type of monetization to bring investors back to the marketplace.

“Right now many people don’t see gold as a useful asset,” he said. “But now if this legislation passes, this bond will put the metal in a new light. Once you have a bond, it turns the metal into a financial instrument.”

Weiner added that he expects investors to start looking at gold again as the U.S. dollar loses its purchasing power in an environment of rising inflation.