Euro bank notes to embed RFID chips by 2005 (tracking system for cash)

The European Central Bank is working with technology partners on a hush-hush project to embed radio frequency identification tags into the very fibers of euro bank notes by 2005, EE Times has learned. Intended to foil counterfeiters, the project is developing as Europe prepares for a massive changeover to the euro, and would create an instant mass market for RFID chips, which have long sought profitable application.

The banking community and chip suppliers say the integration of an RFID antenna and chip on a bank note is technically possible, but no bank notes in the world today employ such a technology. Critics say it's unclear if the technology can be implemented at a cost that can justify the effort, and question whether it is robust enough to survive the rough-and-tumble life span of paper money.

A spokesman for the European Central Bank (ECB) in Frankfurt, Germany confirmed the existence of a project, but was careful not to comment on its technologies. At least two European semiconductor makers contacted by EE Times, Philips Semiconductors and Infineon Technologies, acknowledged their awareness of the ECB project but said they are under strict nondisclosure agreements.

The euro will become "the most common currency in the world" at midnight on Jan. 1, when 12 nations embrace it, according to Ingo Susemihl, vice president and general manager of RFID group at Infineon. The ECB and criminal investigators in Europe are already on high alert, worried not only about counterfeiting of a currency most people haven't seen, but also of a possible increase in money laundering, given the euro's broad cross-border reach.

The ECB said 14.5 billion bank notes are being produced, 10 billion of which will go into circulation at once in January, with 4.5 billion being held in reserve to accommodate potential leaps in demand.

Although euro bank notes already include such security features as holograms, foil stripes, special threads, microprinting, special inks and watermarks, the ECB believes it must add further protection to keep the euro from becoming the currency of choice in the criminal underworld, where the U.S. dollar is now the world's most counterfeited currency. The ECB spokesman said his organization has contacted various central banks worldwide — not just in Europe — to discuss added security measures for the currency.

In theory, an RFID tag's ability to read and write information to a bank note could make it very difficult, for example, for kidnappers to ask for "unmarked" bills. Further, a tag would give governments and law enforcement agencies a means to literally "follow the money" in illegal transactions.

"The RFID allows money to carry its own history," by recording information about where it has been, said Paul Saffo, director of Institute for the Future (Menlo Park, Calif.).

The embedding of an RFID tag on a bank note is "a fundamental departure" from the conventional security measures applied to currency, Saffo said. "Most [currency] security today is based on a false premise that people would look at the money to see if it is counterfeit," he said. But "nobody does that. The RFID chip is an important advance because it no longer depends on humans" to spot funny money.

The basic technology building blocks for RFID on bank notes are similar to those required for today's smart labels or contactless cards. They require a contactless data link that can automatically collect information about a product, place, time or transaction.

Smart labels produced by companies such as Philips Semiconductors, Infineon, STMicroelectronics and Texas Instruments are already used in such applications as smart airline luggage tags, library books and for supply chain management of various products.

"Two minimum elements you need for RFID are a chip and an antenna," according to Gordon Kenneth Andrew Oswald, associate director at Arthur D. Little Inc., a technology consulting firm based in Cambridge, Mass. When a bank note passes through reader equipment, the antenna on the note collects energy and converts it to electric energy to activates the chip, he said.

The antenna then "provides a communication path between a chip [on the bank note] and the rest of the world," said Tres Wiley, emerging markets strategy manager for RFID Systems at TI. For its part, the chip "is a dedicated processor to handle protocols, to carry out data encoding to send and receive data and address memory" embedded on the chip.

Although the industry is "well down the road with the smart label technology," Wiley said he was "a bit surprised to learn that someone goes to that extent — to embed RFID into bank notes — to combat counterfeit money."

A number of challenges must be overcome before RFID tags can be embedded on bills, said Kevin Ashton, executive director of the Auto ID Center at the Massachusetts Institute of Technology. "The most obvious one is the price," he said. Today's RFID tags cost between 20 cents to $1.00, and "that's not economic enough for most bills," Ashton said. "We've absolutely got to get the cost way down." The goal of the Auto ID Center is to find an application that requires billions of RFID chips to bring their cost as low as 5 cents, he added.

While most chip companies with RFID expertise are keeping their plans for money applications close to their chest, Hitachi Ltd. announced plans last July for a chip designed for paper money that would pack RF circuitry and ROM in a 0.4-mm square circuit measuring 60 microns thick.

Although the chip features no rewritable capability, Ryo Imura, chief executive of Hitachi's Mew Solutions venture, said at the time of announcement, "We'll consider them for the next generation [of] products." Hitachi's chip stores encrypted ID information in ROM during the manufacturing process, presumably to replace the serial number of each bank note.

Even without writable memory, Hitachi's chip is said to be fairly costly. Hitachi declined to be interviewed for this article.

While the size of the rewritable memory embedded on an RFID chip will determine the kinds of information it can store, it also affects the chip's cost.

It is unclear whether the ECB will incorporate RFID chips into all euro bank notes or just on the larger bills. The EUR 200 and EUR 500 bank notes in particular — equivalent to roughly $200 and $500 in value — are expected to be popular in the "informal" economy. Embedding a 30 cents chip into a EUR 500 bill would make more sense than putting it into a European buck, several industry sources said.

Manufacturing processes are also considered a major hurdle to embedding a low-cost antenna and chip onto bank notes. "The chip is already so small," MIT's Ashton said. "To connect the two ends of a coil — an antenna — at precisely the right place on a chip could present a major problem."

A printing process is an option, Ashton said, but "you need a breakthrough in the high-volume manufacturing process." Such a technology does not exist today, he said.

Size and thickness are key attributes of an RFID chip for paper currency, said Karsten Ottenberg, senior vice president and general manager of business unit identification at Philips Semiconductors. "For putting chips into documents, they need to be very small — less than a square millimeter — and thin such that they are not cracking under mechanical stress of the document. Thinning down to 50 micron and below is a key challenge." That would require advanced mechanical and chemical techniques, he said.

Bank notes present "an interesting future application for us," said Tom Pounds, vice president of RFID projects at Alien Technology, which holds the rights to a fabrication process that suspends tiny semiconductor devices in a liquid that's deposited over a substrate containing holes of corresponding shape. The devices settle on the substrate and self-align. Rather than working on the interconnection to an RF antenna one chip at a time, "we can do a massively parallel interconnection," Pounds said. Bank notes are not Alien's primary focus at present, he said.

Clearly, the first order of business is to design and market a device to fry these little ba$tards right from the start. The trouble with liberal-think is that it is static. I would intentionally destroy such a device on my currency as a matter of principal. I suspect I am not alone. So then what? Felony money tampering charges? Prison terms for us sneaky jerks who don't think the nanny state as any need or right to track our every move? If I buy a dirty video then years later run for office, will I be labelled a pornophile during the campaign? Will the release of such information bring down the wrath of the gods on the perps head. I think not. Just look at FBI-gate. Everyone skated.

Great. Now we'll get all the best criminal minds working on how to hack into the big money. Once they get the coveted national id of any person, rich or poor, that poor slob is toast. It'll all be done with the click of a mouse.

What about devices which fry other people's money? Set up inconspicuously in rich liberal areas. Banks and stores will not doubt be forced to have scanners. When the Euro-trash socialists find their money worthless, they might not think these chips so needed.

My take on the article was that each bill would have a microchip embedded in it. I was actually thinking of just frying the chip itself so that it could not report back to big brother. I assume the bill itself would still be OK.

Sounds like it's going to cost 10 euro's to make a single euro. And I love that bit about the counterfeit "currency of choice" for the underworld. Hilarious. Even criminals are smarter at economics than the average Euro-crat.

Can Europe do anything right?

This ought be encouraged. It will ensure the continued supremacy of the U.S. dollar...

Yes indeed.

The E500 ($450) will be the note of choice for black market transactions, because it will take up much less room than a similar wad of US$100s.

But if they encode the euro money, it will be useless to the black economy, and will keep the buck supreme.

Remember...every paper dollar overseas is an interest free loan to the US govt that costs US taxpayers nothing!

They say one of the main reasons for this is to stop counterfeiting. So I assumed a scanner would check the bills. But then the chips can't be indestructable. Some bills will be tossed back. So then what do they do?

What about devices which fry other people's money?

Hahaha.. I may not always agree with you, but I DO like the way you think....

>design and market a device to fry these little ba$tards right from the start.

A short burst in the microwave oven should take care of it.

Talk about killing two birds with one stone! A few seconds in the microwave to kill the spores AND the chip gets fried, as well. BTW, want to see something cool? Pop an unwanted CD (those AOL ones work great) in your micowave for a second or two -- I've heard this is how the C_IA destroys theirs that contain sensitive data.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.