Privacy and security need to be built into radio frequency identification tags before they become widespread, the European Commission said, according to an Associated Press report.
The Associated Press report also said the EU would publish guidelines for governments and the industry later this year.
RFID chips can be used to automatically identify and verify passports, luggage, livestock or pharmaceuticals and have a wide range of potential uses, from telling doctors what medicines patients have been given to instantly pointing out food that is past its sell-by date.
But the EU executive's call for public comments on RFID last year unearthed 'a strong lack of awareness and considerable concern among citizens,' a statement from Commission, quoted by the Associated Press report, said.
It said it would work to 'stress the absolute need for citizens to decide how their personal data is used' in an effort to help the technology gain ground in Europe.
The RFID market is growing at a slower pace in Europe than in other regions even though countries such as Germany already insert the chips into passports.
The Commission said a clear set of EU rules were needed to make it acceptable to users.
'This framework should address ethical implications, the need to protect privacy and security,' it said.
The report said EU media commissioner Viviane Reding said her officials would this year draft rules to amend EU e-privacy rules to take account of RFID.
This group would focus on privacy, trust and governance and report back by the end of 2008 on any reforms needed to EU laws, the report further said.