MILAN, June 18 (Reuters) - Plans for a digital euro will

be a "very good" thing for the currency bloc and its lenders if

banks remain central to the flow of money as they are at

present, UniCredit Chief Executive Andrea Orcel said on Tuesday.

"It's a matter of sovereignty for Europe: we cannot not have

a digital euro," Orcel told a conference organised by Italian

bank Mediobanca.

The European Central Bank is looking to launch a digital

currency that could reduce the euro zone's reliance on legacy

electronic payment systems operated by U.S. companies, such as

Visa or Mastercard ( MA ), and counter the emergence of

non-European online payments providers such as Paypal ( PYPL ).

"I think the question is how it will happen: ... are banks

going to be the infrastructure and the framework for a digital

euro like they are for the cash euro?," Orcel said.

"If banks are fully integrated, i.e. 'Dear Customer, you can

have cash or you can have digital' ... then it's seamless and

it will be very good for Europe and very good for banks," he

added.

A parallel system to banks for the digital euro, on the

other hand, would significantly impact the sector by bringing

about big changes in banks' business model which is already

undergoing a transformation, the former UBS investment banker

said.

"More changes for the sector. We're preparing for that,

whichever is the case," he said.

Holding a presentation in April to the Italian banking

association over the digital euro, ECB Executive Board member

Piero Cipollone showed in slides that commercial banks would be

responsible for offering digital euro services to customers.

While that service would be provided free of charge for

consumers, merchants would pay a fee to the payment service

provider handling the digital euro payment, which in turn would

pay a fee to the commercial bank.