The FATF guidelines are intended to prevent regulatory arbitrage across the globe, and to encourage countries to strengthen their cryptocurrency regulations.
“What we are doing is really providing a level playing field,” said Tom Neylan, senior policy analyst at the FATF.
The travel rule also is intended to provide an audit trail that investigators could use in the aftermath of a terrorist attack, and give regulators a tool to implement targeted sanctions, Mr. Neylan said.
The challenge facing the industry is to develop an approach for sending and receiving customer data safely and in a standardized way. Executives say they are meeting regularly, participating in working groups and evaluating proposals from technology providers.
Figuring out a path forward could take several months, compliance officers and other industry executives said.
“The industry is looking at what technical solutions exist, and what should the standards be?” said Teana Baker-Taylor, executive director of Global Digital Finance, a London-based association that has organized a working group to focus on travel-rule standards for data storage, governance and other issues.
The FATF requirements have been criticized in the industry. Among the complaints: They could be costly for startups, and potentially ill-fitted for an industry that places a cultural value on transacting anonymously.
There is also a worry that the travel rule will encourage frustrated customers to rely more on unregulated peer-to-peer transactions. The FATF is monitoring the issue, Mr. Neylan said.
The Chamber of Digital Commerce, a Washington-based trade group, in April asked the FATF to spend additional time working with crypto firms on the new standards.
“We’re looking at old rules and how to apply them in this situation,” rather than looking at new ways for blockchain technology to help law enforcement, Amy Davine Kim, the chamber’s chief policy officer, said Friday.
Executives say they are grappling with several logistical challenges as they figure out the best way to comply. Chief among them is how to share information so that only other exchanges and firms covered by the travel rule can view it, Mr. Horowitz said. The risk is that customer data could end up in the wrong hands.
“How do we secure it?” said Jeff Kern, chief compliance officer at the U.S. unit of bitFlyer Inc., the Japanese exchange. “How do we verify members?”
Additionally, if non-FATF countries adopt a different set of rules for money transfers, it could create a thicket of regulations for crypto firms to comply with, said Jeremie Beaudry, chief compliance officer and general counsel at Celsius Network, a startup that allows customers to earn interest and borrow against their cryptocurrency.
“Then it just turns into what we have in traditional finance or banking, which is different wire rules for different countries,” Mr. Beaudry said.
The FATF said in June it would monitor compliance by countries and firms and conduct a 12-month review in June 2020. Executives said getting a compliance system up and running by then is an ambitious goal.
The coming months will be a test for the emerging industry, Mr. Horowitz said. “What I am impressed with is how quickly a brand new industry can come together and work together,” he said. “We’re doing this all within a short amount of time.”