WASHINGTON/HAVANA (Reuters) -The U.S. Treasury Department on Tuesday announced regulatory changes to allow more American financial support for Cuba’s nascent private sector and bolster access to U.S. internet-based services, limited but timely measures that officials said would help give the island’s budding small businesses a leg up.

The United States said it would permit small entrepreneurs on the Communist-run island to open and access U.S. bank accounts from Cuba for the first time in decades, following prohibitions put in place shortly after Fidel Castro’s 1959 revolution.

The measures would also allow Cuban entrepreneurs to use U.S.-based social media platforms, online payment sites, video conferencing and authentication services, previously unavailable to the sector and a major hurdle currently facing small businesses on the island.

The moves aim to fulfill the Biden administration’s long-delayed pledge to help Cuba’s budding entrepreneurs, giving its small but fast-growing private sector deference despite the Cold War-era U.S. embargo that has for decades complicated financial transactions by the Cuban government.

“Today we’re taking an important step to support the expansion of free enterprise and the expansion of the entrepreneurial business sector in Cuba,” a senior U.S. official told reporters on Tuesday.

The Cuban government did not immediately respond to a request for comment on the policy changes.

In crafting the measures, U.S. officials, who briefed reporters on condition of anonymity, signaled they had sought to balance the goal of bolstering the private sector with a desire to avoid benefit to Cuban authorities.

President Joe Biden took office in January 2021 with hopes high in Cuba for a reversal of a harsh Trump-era approach, but Cuba’s crackdown on protests during the summer of that year prompted the administration to keep pressure on Havana.

The new measures would exclude Cuban officials, military officers and other government “insiders,” with the aim of minimizing resources available from the benefits to the Cuban government, the officials said.

Republican U.S. Representative Maria Elvira Salazar, a Cuban American lawmaker from South Florida, quickly criticized the Democratic administration’s announcement.

“The Biden Admin is now giving the ‘Cuban private sector’ access to the U.S. financial system,” she said in a post on X. “This would make a mockery of American law, considering no progress has been made toward freedom on the Island and repression has intensified.”

OPEN FOR BUSINESS

Cuba has long blamed the embargo – a tangled web of U.S. laws and regulations that complicates financial transactions by the Cuban government – for decades of economic crisis that have left it with little choice recently but to open its economy to small private business.

Such businesses – for decades taboo in Communist-run Cuba – are now booming on the island.

New Cuban laws put in place in 2021 have seen the establishment of upwards of 11,000 small businesses as of May, the government has said, ranging from corner grocers to plumbing, transportation and construction businesses.

Those businesses employ upwards of 15% of Cuban workers and accounted for around 14% of gross domestic product, according to economy ministry statistics from late 2023.

The regulations announced on Tuesday also authorize U.S. banks to once again process so-called “U-Turn” fund transfers, allowing them to move money for Cuban nationals – including payments and remittances – so long as senders and recipients are not subject to U.S. law.

Such measures are a step in the right direction, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council, but he noted a “glaring omission” in the policy: Cuban businesses are still handicapped by a requirement that they use banks in third countries to move their money.

“As long as financing, investment, and payments need to be routed through third countries, the Biden-Harris Administration will be constraining precisely the activity it professes to support,” Kavulich said in an email.

There was no sign that Tuesday’s announcement could foreshadow a more significant easing of U.S. sanctions and other restrictions on Cuba, beyond the modest steps that Biden has already taken since he became president.

Some analysts have attributed Biden’s cautious handling of Cuba issues to his concern that a softened approach to Havana could hurt him politically among strongly anti-communist Cuban American voters in Florida, a key swing state that he lost to Trump in the 2020 election.

The U.S. officials declined to say whether the administration was conducting a formal review of Cuba’s continuing presence on the State Department’s list of state sponsors of terrorism.

(Reporting by Matt Spetalnick and Daphne Psaledakis in Washington, and Dave Sherwood in Havana; additional reporting by Susan Heavey; editing by Doina Chiacu and Jonathan Oatis)

By Matt Spetalnick, Daphne Psaledakis and Dave Sherwood