US researchers have introduced a new way of embedding traceable chips within so-called “smart” paper so that banks and governments can guard against counterfeiting and even track the usage of paper money.

The innovation is perhaps the last after many centuries of fiat currency, considering the rise of virtual currencies in recent months and years.

The new technique of embedding radio frequency identification chips (RFID) in paper was developed at North Dakota State University in Fargo. Researchers used a patent-pending technology known as Laser Enabled Advanced Packaging (LEAP) so as to transfer and assemble the RFID chips onto paper.

Developers believe such “smart” paper could lead to new types of banknotes, legal documents, tickets and smart labels.

“I believe our scheme is the first to demonstrate a functional RFID tag embedded in paper,” says Val Marinov, an associate professor of industrial & manufacturing engineering at North Dakota State University, in a BBC News interview.

The idea of RFID technology enabling the future of smart money has also encouraged the European Central Bank and the Bank of Japan to launch separate projects based on that possibility. Saudi Arabian researchers have also begun their own efforts to embed RFID chips in Saudi Arabian currency.

Marinov says his team’s laser method is quicker than current manufacturing methods and cheaper.
He explained in a press release:

We use our LEAP technology to embed ultra-thin, ultra-small semiconductor chips, including 350 µm/side, 20 µm thick semiconductor dice, in paper substrates with a thickness of <120 µm.

LEAP could transform doing business all the way down to cash transactions. Banks and governments are kind to the idea of using RFID chips to verify authenticity and fight counterfeiting. Police could also track smart money as part of its efforts to how money is being spent.
Heralded in this technology is a future world where trackable banknotes further diminish the privacy of how people use money. For instance, the government might track the flow of money in the so-called “gray economy” that relies on mostly untraceable cash exchanges.

The technology comes at a time of decreasing relevance for paper notes. Although the “black market”, otherwise known as the free market, has increased considerably amid the great recession, the use of cash even there could be on the decline. Virtual currencies such as the decentralized Bitcoin give users a new and cleaner option to transfer money. Because of the Internet, people are more in tuned with how the world works than ever before. And they understand that there are people in power who are trying to interfere with their lives. They’ll understand where to go for privacy, and that’s why if cash doesn’t offer that value any longer, it simply will be abandoned for alternatives.