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  • 1. C O M M E N TA RY By IAN ANGELL and JAN KIETZMANNRFID AND THEEND OF CASH?Thinking about buying a new car with cash? RFID-embeddedHow about paying school fees? Don’t bother. money is likelySuch money is not welcome. Western bankstoday treat all large cash deposits as “suspicious to mean the endtransactions,” covering their backs by immedi- of anonymousately reporting cash-loaded customers to the transactions andauthorities for carrying sums far less than the with it one ofminimum amounts required by regulations.Governments say “Only the guilty deal in the last bastionscash.” Consequently, sensible businesses avoid of personallarge cash deals. Depositing cash into the anonymity.banking system means everything is electroni-cally recorded. New anti-money-laundering regulations, especiallysince the terror attacks of September 11, 2001, identify thesedeposits as the entry point of an audit trail of suspicious transac-tions. What is going on?Illustration by R OLAND S ARKANY COMMUNICATIONS OF THE ACM December 2006/Vol. 49, No. 12 91
  • 2. Legislators in the West have decided in the U.S., much of the increasethat the deregulation of the past decades, due to the use of ATMs andparticularly concerning money (such as demand from abroad [5]. Govern-the loosening of exchange controls), has ments don’t easily give up on theirgone too far. Despite profiting substan- tax take, developing tactics fortially from seigniorage, including the eroding anonymity, fungibility,profit resulting from the difference in the HE MORE T and the ability to store value thatcost of printing money and the money’s make cash so attractive to taxface value, governments grudgingly issue DETAILED THE evaders.exchangeable money; or else other private RECORDING OF RFID Cash has no provenance.groups would. Harking back to Plato and Unlike with checks and credithis moneyless utopian Republic, govern- TRANSFERS THE , cards, it is very difficult in cashments today prefer a perfect society with TIGHTER THE NET transactions to associate a pur-a nonconvertible currency that (they chaser with a purchase or a partic-claim) safeguards their economies from BECOMES AND , ular purchase with otherexternal meddling and from losing the THE MORE purchases. Audit trails have to bewealth of those dissidents who choose to separately and expensivelyescape what they see as state oppression. LIMITATIONS THAT imposed. Roman Emperor Ves-New technology raises the spectre of the ARE PLACED ON pasian 2,000 years ago may havestate gaining total control over money, believed pecunia non olet (moneyachieving this nominal collectivist heaven THE INDIVIDUAL S ’ doesn’t stink), but modern govern-by destroying the essence of cash—the ABILITY TO REMAIN ments sense the possibility of cashcornerstone of individual freedom. giving off the unmistakable odor This scenario seems paradoxical given ANONYMOUS . of each identifiable bearer, makingthat global telecommunications is bring- it a de facto identity card anding about the death of distance. Busi- negating the personal freedomnesses, along with some individuals, have encapsulated in anonymousbecome truly international. Today’s con- money.vergence of the Internet, mobile technol- Although individual bankogy, and electronic payment schemes notes have unique identificationmakes everyone a trader, a global business elite that is numbers, they are not tracked from the moment ofof one mind: arbitrage the new opportunities to min- issue. Indeed, until recently it was too costly to trackimize their tax liability. the cash transactions of individuals (even their checks and credit card transactions), except in special high- priority cases. Now there is computerized profiling,H owever, most governments are addicted to data mining, and radio-frequency identification taxation. Democracies are no exception; how (RFID). The government’s long-term aim may be to else could they afford to subsidize the bene- turn society into a Panopticon, using it as an analogyfits they deliver to preferred voters and contributors? for a prison in which an unseen guard observes allIncreased regulation makes the state even more costly prisoners without them knowing they are beingto run, so the tax take must increase. The state is a observed. By constructing a complete record of theFaustian pact, where the individual submits to its personal debits and credits of all its citizens, thereby“legitimate violence” in return for protection and spinning a web connecting all buyers and sellers, thesecurity [12]. The government, from its side of this Internal Revenue Service and its equivalents outsidebargain, demands ownership of its citizens and the the U.S. not only calculate every tax bill but are ablemonopolistic right to tax them at whatever level to seize payment from those operating in both thewhenever it wishes, calling it “balancing the budget.” official economy and the underground “shadowHowever, taxing cash is complicated due to its three economy.”interrelated properties: anonymity, fungibility, and In a democratic regime, this assault on individualability to store value. freedom must appear benign so as to avoid popular Although credit and debit cards do away with the discontent. Democracies are obliged to profess supe-need for cash, the amount of cash in circulation is rior morality and/or utility in order to convince citi-increasing in almost all countries. As of July 2004, zens of the rightness of their legitimate violence [12].U.S.$730 billion in coins and notes was in circulation The enforcers of state power—the police, national92 December 2006/Vol. 49, No. 12 COMMUNICATIONS OF THE ACM
  • 3. security services, and tax collectors—may be given the tag that uniquely identifies any item bearing the tag.right, nay the obligation, to invade the privacy of cit- So-called “smart tags” are used to track or traceizens with impunity. objects. Worldwide in 2003, they helped keep track of How do democratic governments get their citizens about 100 million pets and 20 million livestock [3].to accept a wholesale loss of privacy? The trick is toconvince them that such intrusion is in their own self- Tinterest and may even deliver personal benefits. Some he Auto-ID Center, established in 1999 as anpoliticians seize the moral high ground by stirring up academic research project at the Massachusettsa smokescreen of public outrage against drug traffick- Institute of Technology, developed the archi-ing, terrorism, corporate greed, pedophilia, and coun- tecture for creating a seamless global network of allterfeiting. They also make the highly suspect claim physical objects ( the pairing of regulation and technology will cure html). The technology has since been transferred tothese social ills, protecting the individual from fraud EPCglobal (, which overseesand theft. Unfortunately, this duo comes at a cost. For development of standards for electronic product codeexample, of the £250 billion estimated to have been (EPC) tags. These tags are used for every imaginablelaundered through the U.K., the government has item—from clothes to medicine, electronics, food,recovered a mere £46 million, at a cost of £400 motor vehicles, books, door locks, and airplanes—million [2]. revolutionizing logistics and supply-chain and inven- The USA PATRIOT Act of 2001 and in the U.K. tory management worldwide. For example,the Regulation of Investigatory Powers Act of 2000 Legoland in Denmark uses RFID and 802.11and the Proceeds of Crime Act of 2002 were all WLAN technology to find lost children [4], andapproved with atypical haste. Legislators have learned U.S. forces employ Texas Instruments wristbands tothe lesson of the 1931 conviction of Al Capone by the help track wounded U.S. soldiers and prisoners ofU.S. Department of the Treasury. If you can’t catch a war in Iraq.criminal in the act, “follow the money” instead. Invert The turn of the century saw substantial gains inthe burden of proof. The accused (in fact everyone) is the efficiency of power conversion in circuits, pro-guilty until proven innocent, where proof of inno- viding power for cryptographic operations. The leastcence is nothing less than the unconditional surrender expensive and least powerful tags (such as basic EPCof all personal and financial information. No surprise tags) provide no layers of security. More advancedthat anti-money-laundering regulations, especially the and costly tags require additional power for cryptog-“know your customer” rules, demand that every bank raphy (such as for static key operations in PINs andofficial act as a secret policeman for the government. passwords, symmetric key encryption, and crypto- Should the privacy dissident operate in electronic graphic co-processors). These extra levels of securitycash? No. E-cash is hopelessly compromised, with enable novel opportunities, not only for commercialissuers intimidated into insinuating an audit trail in transactions but for money itself.the encrypted data; it is just a glorified debit card. Per- An RF-emitting tag can be small enough to fithaps the dissident should stay well away from the gov- into bank notes so as to uniquely identify each oneernment-regulated banking system, using only as it passes within range of a sensor. The authoritieshigh-denomination bank notes. Unfortunately, this claim its purpose is to combat counterfeiting andwell-used tactic no longer provides the desired level of identify money transfers between suspicious parties.anonymity, owing to its convergence with another RFID readers interrogate multiple tags simultane-technology. ously. Every time notes are passed to or from a bank, RFID’s ability to perform as an auto-identification RFID readers identify and record them, linking thistechnology was first utilized by the Royal Air Force in data with the person who presented or receivedWorld War II to differentiate between friendly and them. The government has the potential to knowenemy aircraft. Friendly planes were equipped with not only exactly how much cash is being carriedbulky “active” RFID transponders (tags) energized by out/in the door but who is carrying it and who car-an attached power supply and interrogated by an ried it previously. By comparing the respective iden-RFID transceiver (reader). Applications today rely on tification numbers to entries in their database (forsimilar communication between RFID tag and reader, authentication purposes, of course), the authoritiesalthough the tags (miniscule microchips attached to can draw a link between the last recorded holder ofantennae) are generally “passive,” powered by an elec- the note and the current one.tromagnetic field emitted by the reader. Radio signals This web of contact information is also incom-inform nearby readers of a serial number stored on the plete. It misses out on the numerous cash transac- COMMUNICATIONS OF THE ACM December 2006/Vol. 49, No. 12 93
  • 4. tions not captured by banks, including those that weigh the hazards through a marketing blitz aimed atoccurred as the note was passed hand to hand, start- gaining widespread public with the party who issued it and ending withwhoever returned it to the bank. To increase the accu- Iracy of their records, authorities will indeed expect t’s not only that passive RFID tag technology isintermediate retail and service outlets to identify cus- rapidly maturing among a passive (some might saytomers, then read and report their tags. Cash registers apathetic) public. Innovators predict huge publiccan record all transactions, good and bad, legal and demand for the products of the convergence of per-illegal, honest and dishonest, and identify notes that sonal RFID readers and mobile telephones. Theenter their system, flagging those that are either coun- mobile telephony industry senses a killer application.terfeit or no longer accepted as legal tender. The new Who wouldn’t pay to locate misplaced keys, specta-RFID-based technology gives the authorities the cles, gloves, or socks (conveniently tagged by theirpower to cancel a particular note. The more detailed manufacturers)? By marrying an asynchronous readerthe recording of RFID transfers, the tighter the net with a synchronous mobile phone, the emergentbecomes, and the more limitations that are placed on device would be able to read and transfer tag datathe individual’s ability to remain anonymous. anywhere in near real time. Connecting phones A 2004 Internet hoax involved $20 bills with an and/or tags would make it possible to send andRFID tag in Andrew Jackson’s eye [10]. So it’s all a receive electronic funds. Accessing a tag might alsoruse? Not at all. The 10,000-yen bills (~$100) of trigger a connection to the manufacturer or retailer’s2004 were to be implanted with Hitachi’s 0.4mm2, Internet presence through a mobile phone. Applica-60-micron-thick “␮-chip” [8], each costing around tions for mobile phones equipped with RFID readers50 yen [9]. Plausibly, as the price of tags decreases fur- are endless, promising to introduce huge new revenuether, they will be embedded into smaller-denomina- streams to handset manufacturers, application devel-tion bank notes to increase the recording and opers, and service providers.monitoring of yet more cash transactions. The Euro- The security infrastructure surrounding this tech-pean Union considered implanting tags in its notes by nology, balancing privacy against commercial applica-the end of 2005, though this is on hold, and the tions, is a major concern. RFID does not requireSwedish National Bank has announced a similar idea. line-of-sight for reading tags, operating instead onIs the U.K. or U.S. next? radio frequency. Hence, private data about people No more anonymous cash. But worse, two other and their belongings and shopping behavior can beproperties of cash—fungibility and stored value—are received simply by waving a reader near their clothes,also under attack. Each bank note, whatever its handbags, and other personal items. The size of theirdenomination, should be as good as any other, but shirts is no longer their personal secret, nor is thenot if it’s rejected, discounted, or terminated. By amount of cash they are carrying. By collecting taginsisting that only bank notes with operational tags data on the person being RF-interrogated, the “dataare legal tender, governments may cancel the cash of voyeur” might create a complete commercial, and,targeted individuals. worse, personal profile. What a great method for instantly taxing citizens. One may argue that this problem would be solvedGovernments calculate the tax owed and take the cor- by disabling each tag when it leaves a shop, but this isrect sum straight out of each taxpayer’s pocket by can- neither in the interest of the retailer nor, in fact, of theceling bank notes, then reprinting and reissuing new customer. Tags will store warranty information (paperones bearing different RFID tags. The possibilities are receipts will no longer be accepted) and, more impor-limitless. By giving each note an expiration date, gov- tant, the rights of ownership (a stolen item is easilyernments may force bearers of cash to spend their identified). It is thus in the interest of the purchasermoney. The government can also hold out the threat to keep tags alive. Furthermore, using RFID-enabledof instant devaluation, with the value of a bank note phones in the exchange of goods and money is both abeing not the numbers printed on the note itself but guarantee and a proof of the transfer of ownership.the amount coded into the tag, drastically transform- Only a troublemaker would want to destroy or dis-ing the notion of stored value. able such useful data. Why doesn’t everyone object loudly and publicly? So there are very real general benefits in RFIDIt’s not just ignorance of the technology. A very real technology. However, this does not mean that theopportunity presents itself, as RFID technology finds mixing of cash and mobile RFID will receive strongits way into the home at a price all can afford. The support. As with many new technologies, innovatorsviral message is going out that the benefits far out- promise utopia; meanwhile, governments may declare94 December 2006/Vol. 49, No. 12 COMMUNICATIONS OF THE ACM
  • 5. that only tagged items are secure, and identify individual travelers throughindustry proclaims the convenience the tagged cash and goods they carry.and savings made possible through There will be no more slippingmobile RFID readers. It is not surpris- through customs without paying dutying that two main supporters of RFID or carrying suitcases full of money toare the U.S. Department of Defense Switzerland.and Wal-Mart and are likely to be However, because RFID technol-joined by the mobile technology sec- B Y COLLECTING ogy doesn’t require a physical connec-tor and others once new revenue tion between tag and reader, officialsstreams are more apparent. TAG DATA ON will be able to validate a person’s iden- Benefits to major corporations and THE PERSON BEING tity not only at the port or airport butgovernments will not in and of them- also in any public or private spaceselves generate public acceptance of RF- , INTERROGATED within the limited range of the RFID “tagged cash. That acceptance is essen- THE DATA VOYEUR ” tag/readers, all without the expresstial if the technology is to overcome permission or even awareness of theprivacy objections. Hence the issue of MIGHT CREATE person. As the range at which tags maymobile RFID and tagged bank notes, A COMPLETE be read increases and the technologywhile contributing to decreased improves, will unreasonable searchanonymity, is being marketed to indi- COMMERCIAL , and seizure become imperceptibleviduals as a self-evident personaladvantage. Once people are proffered , AND WORSE , search and seizure?a bank note, their mobile phones read PERSONAL . Bthe tag, establish a connection to the PROFILE ut it’s not only the governmentauthority’s database, and receive con- watching from the shadows.firmation of the note’s authenticity Privacy advocates argue thatand validity and of the legitimacy of mobile RFID readers can lead tothe bearer. Fraud will decrease dra- increased identity theft, high-techmatically. As a byproduct of the stalking, and commercial data collec-process, the government will obtain tion [11], perhaps with the intent ofyet more information for its database hijacking the seemingly good inten-of cash transfers from private citizens, as well as from tions of RFID-tagged goods and cash. Indeed, retail-the banking, retail, and service sectors. As tagged ers are concerned that thieves equipped with mobileproduct purchases find their way into our homes, we RFID devices will create new and sophisticated wayswill be only a step away from installing indoor of shoplifting. Anarchists have long dreamed of thereceivers into our shelves, floors, and doorways [1]. destruction of the state by destroying its power toThe net on anonymity will continue to tighten. The issue and control money. In “chaos attacks,” they hopecriticism of Katherine Albrecht, founder and director to damage tags embedded in cash to render it practi-of an advocacy group called Consumers Against cally invalid until exchanged at banks for good moneySupermarket Privacy Invasion and Numbering with valid tags, causing major inconvenience and dis-(, and others have convinced ruption. Global retail chains (such as McDonald’s),Auto-ID Labs around the world to address the grow- for years targets of environmental activists, would finding concern and work on ways to deal with the pri- collecting and then validating large amounts of cash avacy issue. constant headache. This is just as well, because the databases of tags When only fully functioning tagged money will beand their bearers maintained by various governments good money, what happens when a tag is destroyed,don’t stop with money. In the name of homeland whether by accident or on purpose? General access tosecurity, new U.S. passports will contain standard the government’s provenance database of moneypassport data in an embedded tag that can trigger the (needed to replace genuinely damaged bank notes)respective name, address, and digital picture. will introduce unimagined levels of complexity intoAlthough not encrypted, security will be warranted the system, along with the likelihood of database fail-through digital signatures [11]. The world’s national ure. How do we ensure that thieves do not screen theborders will be equipped with readers, thereby tagged content of our wallets to find out if we areincreasing control of the transnational flow of people. worth robbing? Innocents will need to engage inBy extension, immigration officials will be able to countermeasures: wallets will contain RFID shielding COMMUNICATIONS OF THE ACM December 2006/Vol. 49, No. 12 95
  • 6. material for personal security reasons, potential for use in small denomina-and people will carry RFID blockers tions—real cash money. Maybeor tag jammers to disrupt transmis- Hayek’s vision of the “denationalisa-sion of information to scanning tion of money” [6] will become adevices. reality. As a substitute for govern- We will soon be living in a world of ment-issued bank notes, we maytags, with different ones serving differ- instead just deal in yet another,ent purposes. EPC tags will store untagged currency to maintain ourGlobal Trade Identification Numbers anonymity. cto give each item a unique identifica-tion number. RFID-tagged items will HOW DO WE REFERENCESbe as ubiquitous as barcoded products ENSURE THAT THIEVES 1. Albrecht, K. Supermarket cards: The tip of the retail surveillance iceberg. Denver University Laware today but be even more pervasive. DO NOT SCREEN THE Review 79, 4 (Summer 2002), 534–539 andHowever, unlike barcodes, multiple 558–565.RFID tags can be read simultaneously, TAGGED CONTENT 2. Bawden, T. U.K.’s bid to trace dirty money is ‘pathetic.’ Times Online (Mar. 15, 2005); busi-each distinctively identifying the OF OUR WALLETS TO,,8209-bearer at once without the need for 1525951,00.html. 3. Booth-Thomas, C. The see-it-all chip. Timeline-of-sight or direct contact between FIND OUT IF WE ARE Online Edition (Sept. 14, 2003);reader and tag. Each of us will be awalking mountain of tags, and it will WORTH ROBBING?,9171, 1101030922-485764,00.html. 4. Collins, J. Lost and found in Legoland. RFIDbe impossible to isolate them all from Journal (Apr. 28, 2004); www.rfidjournal.being read. Moreover, due the conver- com/article/articlview/921/1/1/. 5. Federal Reserve Bank of New York. How Cur-gence of the pervasive mobile tele- rency Gets into Circulation. Aug. 2004; newyork-phone and RFID readers, everyone be able to obtain all manner of 6. Hayek, F. The Denationalisation of Money. Insti- tute of Economic Affairs, London, 1976.information about everyone else— 7. Hayek, F. The Road to Serfdom. University offrom passports, clothes, personal data, Chicago Press, Chicago, 1972. 8. Hitachi. The World’s Smallest RFID IC. Hitachi,and, in particular, cash. Ltd., Tokyo, 2004; chip/. 9. Leyden, J. Japan yens for RFID chips. The Regis-W ter (July 30, 2003); ill the convergence of money, mobile tele- 2003/07/30/japan_yens_for_rfid_chips/. phony, and RFID inexorably lead to the 10. McCullagh, D. RFID Industry Tries to Debunk ‘Exploding $20 Bill’ Myth. Association for Automatic Identification and Mobility, Inc., end of cash as we know it? Is this “the Warrendale, PA, Mar. 18, 2004; delivery of the individual to the tyranny of _RFID_industry_tries_to_debunk_exploding_$20_bill_myth.html.the state, the final suppression of all means of escape, 11. Singel, R. American passports to get chipped. news (Oct. 21, 2004);,1848,65412,00.html.not merely for the rich, but for everybody” [7]? Possi- 12. Weber, M. Politics As a Vocation. Hackett Publishing Co., Indianapo-bly. The technology will ensure that personal credit lis, IN, 2004.devices no longer come in the shape of cards but astags in keychain fobs, stickers, and implants. Cash aswe know it will be an anachronism. RFID develop- Ian Angell ( is a professor of information systems in the Department of Management in the London School ofments in the name of supply-chain management and Economics.national security will complement the worldwide Jan Kietzmann ( is a researcher in theflood of tags. The public will be ready—enthusiasti- Department of Management in the London School of Economics.cally armed with RFID-reading mobile phones to Permission to make digital or hard copies of all or part of this work for personal orscan items in shops and the money they handle, as classroom use is granted without fee provided that copies are not made or distributedwell as information about one another. for profit or commercial advantage and that copies bear this notice and the full cita- tion on the first page. To copy otherwise, to republish, to post on servers or to redis- Can the stampede of privacy-invading mobile tribute to lists, requires prior specific permission and/or a along Friedrich Hayek’s Road to Serfdom[7] be stopped? After all, money does not have to becreated legal tender by governments. Due to lowtransaction costs, organizations can issue money, pos-sibly as a percentage of their equity. To a certainextent this is already happening with large-denomina-tion bonds, but new technology introduces the © 2006 ACM 0001-0782/06/1200 $5.0096 December 2006/Vol. 49, No. 12 COMMUNICATIONS OF THE ACM