Introduction The development of information technology and the emerging of a number of new innovations are taking place in the area of retail payments known as electronic money (e- money).This development influencing the banking industry due to the increased use of pre-paid card, e-purse, and e-wires of money orders, e-banking, e-loans. These innovations have the potential to challenge the predominant role of cash for making small-value payments and could make retail transactions easier and cheaper for consumers and merchants. However, they also raise a number of policy issues for central banks because of the possible implications for central bank and monetary policy and because of central banks' general interest in payment systems. This paper provides a definition of electronic money and a description of its key features. It discusses the factors influencing the development of e-money products. Finally, it reviews the policy issues raised by e-money developments, as seen from a central bank perspective, and discusses the possible policy responses and try to answer the following question: would E-money development affect central bank role and monetary policy? Problem of the Study "The term [electronic] money refers to various proposed electronic payment mechanisms designed for use by consumers to make retail payments. Digital money products have the potential to replace central bank currency" (Berentsen, 1997). This quote indicates that the advent of electronic money will have an impact on the banking system and monetary policy. While this topic is controversial it seems obvious that some changes will result and that there is no prefect answer to predict this new instruments affect on monetary aggregates and the role of central banks. Its growth will be based on many things: future technology, increased security, regulation, and ease of conversion. It can impact such variables as monetary supply, exchange rates, the money multiplier, velocity of money and seignorage. Increased reliance on electronic money as a substitute for currency will directly affect the central bank and its control over monetary aggregates and policies. Purpose of the Study This paper will focus on the development of electronic money and its impact on the central bank role and monetary policy. Here the focus is primarily on the forces sustaining the development of e-money and on the central bank ability to conduct monetary policy in the presence of e-money. The purpose of the paper aims at discussing the following issues: 1- Does electronic money considered as a form of inside money similar to private notes issued by free banks? 2- If this is the case, does this situation challenge the control of the central bank over the supply of money? In other words will the monetary policy still be efficient? Methodology of the Study This paper depends on analytical method at determining the impact of the development of electronic money in the different areas related directly or indirectly to the emerging of this new innovation at the last decade. In this paper we incentive our effort at analyzing the previous literature review related to this subject to make better understanding to all aspects of this subject depending on a judgment approach which represent our persuasive in this field to determine the most influenced areas to obtain the best conclusions and give the appropriate recommendations to convene our results. Definition of Electronic Money Electronic money is the money balance recorded electronically on a "stored-value" card (Ely, 1996). These cards, "smart cards," have a microprocessor embedded which can be loaded with a monetary value. Another form of electronic money is network money, "software that allows the transfer of value on computer networks, particularly the internet. Like a travelers check, a digital money balance is a floating claim on a private bank or other financial institution that is not linked to any particular account" (Berentsen, 1997). …