The European Central Bank is understood to be in talks with Hitachi about embedding radio tags in euro banknotes.
A Japanese news agency said the bank is looking at the possibility of embedding the world's smallest integrated circuit, developed by Hitachi, into notes to prevent counterfeiting.
A bank spokesman said it is always researching technologies to see what could be useful for banknotes, although he added that all research and development work for the bank is covered by non-disclosure agreements.
Hitachi is developing non-contact chips for use in banknotes and other paper documents, Kantaro Tanii, the company's corporate communications manager for Europe confirmed. He would not comment on specific partnerships.
Hitachi's website describes a 0.4mm x 0.4mm x 60micron radio frequency identification chip, called the Mu Chip, that works in the 2.45Ghz frequency band and has a 128-bit Rom to store its identity number.
The chip was originally conceived as a banknote tracking device but could also be used in passports, driving licences and other official documents.
Gillian Law writes for IDG News Service