- The Washington Times - Wednesday, July 16, 2003

In the technical press, readers repeatedly run into the assertion that the European Central Bank is considering incorporating into the euro tiny electronic circuits. The chips would give each bill a unique, electronically readable and counterfeit-proof serial number.

Privacy advocates say it would also make anonymous transactions a thing of the past.

Radio-frequency identification tags (RFIDs) exist, and work, though they have not been used in currency.

In one form, the tag consists of an inductor and capacitor to form a circuit tuned to the frequency of the reader. The energy comes from the reader, not the tag, so no batteries are needed.

Many retailers are looking at them for inventory control: When you buy the leather bomber jacket you’ve always wanted, a reader at the cash register reads the tag, and the store’s computer reduces the inventory of bomber jackets by one.

It also could associate the jacket with your credit-card number, perhaps useful for warranty reasons. The spooky question is whether the store would remove or deactivate the chip, which otherwise could be used to identify you every time you walked near a reader.

For most purposes, the size of the tags, roughly that of a grain of sand, is not a barrier to their use. Nor is cost. Prices range from 5 to 20 cents each. The distance at which they can be read varies from inches to hundreds of feet. This is fine for large products.

The use of RFIDs in currency is another thing, and it is not a done deal.

Embedding the chips in money would be more difficult than putting them in large products.

Think of the thickness of a grain of sand and of a dollar bill. Unless the thickness of the bill were increased, the RFID would stand out. Money gets rough treatment. Whether the chip would work its way out of the substance of the bill, or simply be crushed, isn’t known. If a chip cost 5 cents, it might not make sense to embed it in anything other than large bills.

If it worked, however, they would make counterfeiting much more difficult.

For one thing, you can’t make integrated circuits in your basement, even if you have a lot of money. They come from chip foundries, such as the ones Intel operates. These can cost up to a billion dollars to build, and they’re kind of conspicuous.

The dream of Treasury officials everywhere has been to come up with some characteristic of currency that criminals can’t replicate. Maybe they finally have it.

In an age in which huge amounts of money are spent on drugs, and that money is being laundered in all sorts of ways, the ability to easily track it as it washes through the international financial system appeals to police.

In principle, it can be done now by tracking serial numbers. In practice, serial numbers are difficult and time-consuming to read, and few people are going to do it. However, electronic readers at banks or stores could read the serial of every chipped bill that came to it.

Further, computers being what they are, it would be easy to send banks a daily list of numbers to be looked for, which the reader would check against the number of every bill coming through the bank.

For law enforcement, this would be desirable. A friendly neighborhood Drug Enforcement Agency agent could buy a rock of crack with a known $20 bill. The DEA then would wait to see where it next showed up. If a lot of such bills were deposited at Wachovia by Joe’s Car Wash, it would be obvious that Joe was washing more than cars.

If serial-number tracking became automatic and universal, life would be harder for bad guys.

On the other hand, how carefully do we want to be watched?

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