China announces sanctions against two banking entities in Lithuania

On August 13, the Chinese Ministry of Commerce announced sanctions against two banks in Lithuania, UAB Urbo Bankas and AB Mano Bankas, and prohibited Chinese institutions and individuals from conducting business with them.

This retaliatory measure is a direct response to the EU's sanctions decision against two Chinese financial institutions on July 18. At that time, the EU accused these two Chinese banks of assisting Russia in evading sanctions through cryptocurrency services.

However, the two Lithuanian banks sanctioned by China both stated that their operations in China are minimally affected. The CEO of UAB Urbo Bankas stated that the bank has no business dealings with China; while AB Mano Bankas also confirmed that the sanctions will not impact its daily operations. This indicates that Beijing has chosen targets for sanctions that are more symbolic than economically impactful.

Analysts point out that China has chosen Lithuania's banks as a target for sanctions, continuing the diplomatic friction between the two sides since 2021. At that time, China had already downgraded its diplomatic relations with Lithuania because Lithuania allowed Taiwan to establish a representative office. Now, the sanctions against Lithuanian banks once again highlight that cryptocurrency is becoming a new battlefield in international financial struggles.

Currently, both parties are restricting financial institutions to exert pressure for policy changes. Previously, the Bank of China faced sanctions similar to those of the United States due to its involvement in Russian business. Some state-owned banks have tightened financing for Russian clients after being threatened with secondary sanctions. This pattern of sanctions indicates that the financial war may continue to spread across different jurisdictions.

The European Commission stated that it is evaluating China's countermeasures and emphasized that it still hopes to resolve the issue through dialogue. China's Ministry of Commerce, on the other hand, urged the EU to immediately correct its so-called "wrong practices," stop harming China's interests, and claimed that the EU's initial sanctions violated international law.

This event reveals the dual nature of cryptocurrencies in the international economic system. It can be used as a tool to evade sanctions, while also playing a key financial role in the new economic system.

With the ongoing Russia-Ukraine conflict, the cross-border flow characteristics of cryptocurrencies have made them a new focal point for competition among countries. This tug-of-war over sanctions related to cryptocurrencies may prompt countries to accelerate the establishment of a "sovereign firewall" in the digital financial sector that is autonomous and controllable.

#Economic Sanctions