German Health Minister Jens Spahn and Chancellor Angela Merkel's chief of staff Helge Braun said the government was now in favour of a “decentralised software architecture” that would see user data stored on people's own phones instead of on a central database.
“Our goal is for the tracing app to be ready for use very soon and with strong acceptance from the public and civil society,” Spahn and Braun said in a joint statement.
The rollout of an app that would use bluetooth to alert smartphone users when they have been in contact with someone infected with the virus is considered crucial in the fight against the pandemic as countries like Germany relax their lockdowns.
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The government had until thrown its weight behind a pan-European app known as PEPP-PT being developed by some 130 European scientists, including experts from Germany's Fraunhofer research institute and Robert Koch Institute public health body.
But the proposed app had faced growing criticism over its plan to store data on a central server.
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Critics said it would allow governments to hoover up personal information and could lead to mass state surveillance.
In an open letter earlier this week, some 300 leading academics urged governments to dismiss the centralised approach, saying it risked undermining public trust.
They said an approach being developed by Apple and Google, whose operating systems run most of the world's smartphones, was more privacy friendly.
The tech giants plan to collaborate with apps, like the Swiss-led DP-3T, that use a decentralised system, which would see data stored on individual devices.
The European Commission has also recommended that data harvested through coronavirus contact-tracing apps should be stored only on users' own phones and be encrypted.
The German government has repeatedly stressed that the use of any coronavirus app would be voluntary and anonymous, in a country still haunted by the spying of the Nazi era and the former East German secret police.