University of Arkansas

Walton College

The Sam M. Walton College of Business

Episode 7: Carol Goforth Provides Insight Into Cryptocurrency and Its Function as a Cyber Economy

January 16, 2019  |  By Matt Waller

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Carol Goforth is a University Professor and the Clayton N. Little Professor of Law at the University of Arkansas School of Law. She is the former Associate Dean for Academic Affairs and a former Arkansas Bar Foundation Professor of Law.

Episode Transcript


00:08 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be Epic, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business education and your life today. Today, I have with me Carol Goforth, University Professor and Clayton and Little professor in the School of Law at the University of Arkansas. Thank you for joining me.

00:39 Carol Goforth: It's my pleasure.

00:43 Matt Waller: You know Carol, I have noticed, in a fairly short period of time, you've been very prolific in your research and publications on cryptocurrency.

00:53 Carol Goforth: It is something that I surprisingly found myself very excited about, and it is easier to be prolific when you are really intrigued.

01:05 Matt Waller: Absolutely. What got you interested in cryptocurrency?

01:10 Carol Goforth: I'm going to have to thank Stacy Leeds for that. She was the Dean of the Law School, and as you know now, she's the Vice-Chancellor of Economic Development. And I believe somebody reached out to her and said that they were interested in contemplating the possibility of starting a crypto-based business in Arkansas, and was there anyone at the Law School who had a potential interest in coming and talking with them about some of the legal ramifications? She offered my name, I did not know anything about cryptocurrency at the time, but I was interested. I went, and while I didn't catch crypto fever, I was intrigued. So that's how I got started.

01:54 Matt Waller: I remember one of the first papers I read that you published was about... It was like a dictionary for people interested in business, in business law around cryptocurrency and blockchain. Would you mind talking about that a little bit?

02:13 Carol Goforth: Sure. One of my loves is bad puns and so we call that the Cryptionary. So it is designed to give people who are not familiar with cryptocurrency, with blockchain, with the underlying technology, with some of the more recent developments, a working knowledge of the terms that are used. When you start learning about this, it is very difficult because there are words that don't have a common understanding, a commonly shared meaning, and it is hard to figure out what people are talking about. So after spending quite a bit of time reading, I decided to share the insights that I had gained in the Cryptionary.

03:01 Matt Waller: Yeah, part of what makes it confusing is, there's talk about Bitcoin, blockchain, cryptocurrencies, tokenization, there's so many terms, and of course, the whole concept behind blockchain came from Bitcoin, isn't that right?

03:23 Carol Goforth: I think it's the other way around, I think... Excuse me, I think Bitcoin came from blockchain. So there was a problem that, if you were going to use something called a distributed ledger, that you could not trust the other people who are out there, and the solution to that was the innovation created by someone or some group of people known as Satoshi Yakamoto, and they created a consensus protocol, and that allowed for a system that replaced trust, because in the modern world, you can't trust people you don't know. So if you're going to have this group of people and you need to be able to know that what they're doing is accurate, and you can't see them, and you can't trust them, how do you do that? He developed computer programs and an idea that enabled that. The first viable application of that in the blockchain context was Bitcoin. And of course, that's the most famous.

04:39 Matt Waller: And I know in your Cryptionary, cryptonary, what did you call it?

04:44 Carol Goforth: Cryptionary.

04:44 Matt Waller: Cryptionary, Cryptionary. I found it really interesting, just because you, as you read through it, even though it's in alphabetical order, it really clarifies a lot of questions that come up as you first start looking at cryptocurrencies and blockchain.

05:04 Carol Goforth: Well, that was the intent. I was really concerned that there are so many legal issues that surround this new technology and the way it's being implemented that I was truly worried that people would not have good legal advice. And as a lawyer, you can't give advice if you can't understand what your clients are talking about. So this was really written as a tool to help lawyers who can then communicate with their clients and then figure out how what the clients are doing fits into the legal regime.

05:42 Matt Waller: And you've written a number of other related articles as well since then.

05:47 Carol Goforth: My history, my background was Securities and Corporate and Business Law, and so, the next piece was the securities law application to cryptocurrencies. And so, that was something I was really familiar with, and I've done a couple of other pieces on different aspects of cryptocurrency, crypto asset, crypto transaction regulation.

06:00 Matt Waller: We know... So cryptocurrency as a currency, cryptocurrencies as an investment, cryptocurrencies for Smart Contracts, cryptocurrencies for all kinds of things. How do you keep all this straight?

06:35 Carol Goforth: It's kind of amusing. One of the... My most recent article, which actually won't be published until April, is called, in the US, a single crypto asset can be a property, a currency, a commodity and a security all at the same time, and it is hard to keep track of. It's really hard because, in the legal sphere, those are specialties that don't always overlap, so people who are really familiar with tax law are not necessarily the people who are good about commodities regulation, or banking regulation, or securities regulation, or vice versa. So it is hard.

07:18 Matt Waller: Is that the article that talks about how all of the different regulatory agencies are wanting to regulate it and it might be impeding our ability to move forward?

07:29 Carol Goforth: Right. I think that the... Even in the course of our conversation, I've talked about and you've talked about cryptocurrency, and that was the original use of blockchain. Bitcoin was designed to be this wonderful replacement for government-backed currency, which in the area is called fiat currency. And the first alternatives to Bitcoin were also designed as alternative currencies, digital currencies, but the most recent applications are not all designed as currency. Unfortunately, I think we got used to thinking of everything rather monolithically, and our regulatory agencies tend to think of it as one kind of asset. So once you regulate a little bit of it, you wanna regulate all of it, and everybody wants to regulate all of it. So the SEC calls it all a security and the Commodities Future Trade Commission calls it all a commodity. The IRS wants to maximize tax revenue, they call it all property. FinCEN, the Financial Criminal Enforcement Network, which is a bureau in the Department of Treasury, calls it all a currency. So that's how you get one thing, one asset with multiple labels attached to it simultaneously.

08:55 Matt Waller: We know initial coin offerings, ICOs, have become popular. You see it written about quite a bit and talked about, and it certainly... And it's something that people seem to not have their heads around, yet at the same time, they're delving into it quite deeply.

09:18 Carol Goforth: Well, it is an interesting phenomenon. The label ICO sort of harkens back to IPO, which is the initial public offering for traditional securities, and the SEC is very used to regulating and requiring registration of IPOs. And so, by calling these initial coin offerings ICOs, I think it's almost like the people who are in the crypto world shot themselves in the foot. They encouraged the SEC to think of these things in that vein and to regulate. And so you have the chairman of the SEC saying things like, "I've never seen an ICO that doesn't involve the sale of securities." And I think that creates a problem, because sometimes, these interests really should not be securities, I think.

10:18 Matt Waller: So Carol, when you got into this, you were starting from zero like everyone else not too long ago.

10:23 Carol Goforth: Yep.

10:26 Matt Waller: I'm sure it took a lot of work to really get your head around this, and I can tell by reading your writing that you have put a lot of work into this. That's very evident.

10:38 Carol Goforth: It's interesting to call it work. I like to say, when people say, "Do you like to be a law professor?" I was like, "Yeah, I get paid for doing the stuff I like." So you're calling it work. What it was, was reading about something that I was interested in. I like to learn new things. It took a lot of time, because there is so much out there and it is not really written for somebody who has no background in it, they all tend to assume a level of knowledge, and every writer tends to use words a little bit differently from almost everybody else. So one of the things I talk about repeatedly in multiple articles is just how difficult it is to get a handle on the terminology, because "cryptocurrency" doesn't mean the same thing every time it's used, "token" doesn't mean the same thing every time it's used. But it really wasn't work in the sense of hard labor, it was something I really liked.

11:42 Matt Waller: It makes a big difference when you have a passion and you're curious.

11:46 Carol Goforth: Yeah.

11:47 Matt Waller: Now this tokenization, it seems like there's tokenization of all kinds of things going on right now.

11:56 Carol Goforth: There is more talk about tokenization of all kinds of things than there actually is the finished product. One of the things that the blockchain innovation has allowed for is the possibility of creating digital ledgers, digital records of ownership, so that you can trace... Recently, we had that horrible problem with romaine being contaminated and it took a fair bit of time to figure out, "Oh, which lettuce was contaminated? Which lettuce should you not buy?" If we had had a train of ownership that had been put on a ledger, it would not have been susceptible to manipulation, it would have been open and accessible, and it would have potentially been very quick to figure out, "Oh, the contaminated lettuce, I trace it back from here to here to here to here. It came from there. Don't eat that lettuce." But we don't... We're not there yet. So it is the potential to create tokens, to create smart contracts, to create chains, blockchains that function in a wide variety of settings, rather than the reality. We're gonna get there. We're not there yet.

13:31 Matt Waller: You take something like a basic attention token, what you hear about, and I don't know how far along they are on basic attention tokens. But the notion of it was that you can... One of the original concepts I had heard of, and that was a few years ago, was that you could buy a basic attention token on a market for basic attention tokens and include it in your web browser, specialized web browser, and determine who you allow to see certain kinds of information and set up an agreement where they would pay you for certain kinds of information or pay you for the ability to watch your browsing behavior. Have those gone anywhere, or is that still just a concept?

14:23 Carol Goforth: I believe that's... As far as I know, that's still a concept. One of the first things I read about was using similar kinds of tokens and records to make ownership of assets and financial documents completely transparent. So that if you were a politician and you did not want to hide your tax records, did not want to hide where you were getting your donations from, did not wanna hide, you wanted to make it perfectly open but not susceptible to manipulation, you could put that data out on a blockchain and people could figure out exactly who you were from a financial standpoint. And I don't think that's gone anywhere either, except it's been talked about.

15:15 Matt Waller: What would you recommend... Tokenization, when someone hears the word tokenization, I think it kind of conjures up the notion of creating a currency of some sort. Of course, that's not really the way the term's being used right now, but have you come up with some ideas around... You've got a Cryptionary, but have you come up with some ideas around what things should be called?

15:45 Carol Goforth: What things should be called? Rather than calling things a cryptocurrency, I like calling things crypto assets. These are various kinds of interests, and I think that if we move away from using cryptocurrency as the catch-all label, perhaps we can nudge our regulatory agencies away from treating everything as if it's the same thing. There are some that are cryptocurrencies, I would reserve that term for interests like blockchain, like... Excuse me, like bitcoin, the alternative coins, Litecoin, DarkCoin, Zcash, Monero, there are literally hundreds of alternatives, but they were designed to be currency and I would preserve cryptocurrency for that, and everything else would be a token, and if I wanted to talk about the world of cryptocurrencies and crypto tokens, I would rather see "crypto asset" used. I think it's less confusing. That's not very helpful for a lot of kinds of interests, it's a very, very, very broad category.

17:04 Matt Waller: And the whole concept of blockchain can be separate from crypto assets and cryptocurrency.

17:13 Carol Goforth: Absolutely, it doesn't have to be tokenized. Blockchain has applications way beyond creating a token that has either function as a currency, or some other ownership interest, or power, or right, or access, or privilege associated with it.

17:37 Matt Waller: Do you think... Is the Federal Reserve, to your knowledge, doing much research or work in this area?

17:48 Carol Goforth: I have no idea if the Federal Reserve is doing anything. The treasury department certainly has a working group on cryptocurrencies. There certainly is no hint that the United States is considering tokenizing the US dollar. There are some countries in the world that do now have tokenized currencies. They're, for the most part, small. And then, of course, there's Venezuela that's got the Petro, but it's not a replacement for Venezuelan currency. It is a Venezuelan oil-backed crypto asset.

18:31 Matt Waller: And what are some of the countries... Who are some of the countries that have eventually...

18:35 Carol Goforth: Oh, they're tiny, little ones, and I think the Marshall Islands might have been the very first one that created a currency and made it a legal currency, along with the US dollar, which is the other legal currency there. And I think there's a couple of others now, but they're small.

18:58 Matt Waller: What do you think the United States should do in terms of trying to get the regulatory agencies to cooperate with one another and to coordinate around a vision for the future?

19:15 Carol Goforth: In the real world or an ideal world?

19:17 Matt Waller: Ideal.

19:18 Carol Goforth: In an ideal world, I actually would like to see the CFTC and the SEC combined. I think there is a considerable amount of overlap in experience and duplication. They're both interested in different kinds of financial markets and protecting investors and protecting the public. They are both very active in anti-fraud. I think duplicative enforcement and regulatory approach is not good from a regulatory standpoint, it's not good from a standpoint of legitimate users, or the public, because it's expensive. There have been several, several suggestions in the past few decades about combining those and they haven't gone anywhere, so that is truly a pie in the sky kind of reaction.

20:12 Carol Goforth: More likely, if the CFTC was to take the position that it would leave regulation of everything except futures interests and derivatives based on crypto assets, leave that all to the SEC, I think we'd be better served. FinCEN continues to have to have a role for the true cryptocurrencies because we're worried about funding of illicit, illegal activities and money laundering, so they've got to have a role if you are going to do something that is a replacement for fiat. I probably would not have them quite as involved for interests that are regulated as securities, and treat everything as regulating broker-dealers and exchanges rather than treating every intermediary as a money transmitter, which is what they're doing right now.

21:17 Matt Waller: What are some of the biggest opportunities, in your mind, for crypto assets, cryptocurrencies?

21:27 Carol Goforth: The problem is, a lot of people who are really active in this space are not active because they have something that will function better right now as a token, they are interested in it because it's new, it's novel, it's trendy, and there's a whole lot of money that appears to be associated with it. So when you have something that would function better on an immutable, open distributed blockchain, and you have the smart contracts, and you have the underlying computer programs at a stage where you're happy with them, then that's where I think you're going to see tokenization of interests that really make sense. And right now, the smart contracts are getting there, but they're not there yet, so this is still a moving target in terms of what's possible, what's realistic, and what's beneficial, and it's driven by how much money there is.

22:48 Matt Waller: If you were to advise the Federal Reserve on what they should be doing now, given these trends, what would you tell them?

23:01 Carol Goforth: The Federal Reserve, which sets monetary policy, I would probably be happy with them taking a wait-and-see approach. The markets for all of the cryptocurrencies are still incredibly volatile, as you've seen just in the past couple of weeks with the price of Bitcoin plummeting, and there's more and more evidence coming out that the big push that raised the Bitcoin price to about $19,000 a year ago was driven by manipulation, by a relatively small number of players in the area with carefully timed purchases. Because manipulation is possible, because there is volatility, because there are a lot of players out there who are really not necessarily acting in good faith, I don't see a huge need to adopt, or push, or encourage this, and I don't think that it's going to be prevalent enough in our world, our society, for the Fed to have to worry about it.

24:21 Carol Goforth: The places that really, really could benefit from cryptocurrencies are countries where there is such prevalent fraud, such prevalent mismanagement, thousands percent increases in inflation, that an alternative to government manipulation could benefit the population. And honestly, I'm not a conspiracy theorist, that's not the United States. We're not there, but there are some countries in the world that are there.

25:00 Matt Waller: What would you recommend to students who are studying business or law, or both, in preparing to be out in the work world? And there is a benefit to being aware of trends that are occurring in the world, is there a good way for them to stay on top of this and understand it?

25:13 Carol Goforth: That is a difficult question. There are so many resources out there that you can't read everything, so finding blogs that you relate well to and sort of following along. There are different groups out there. CoinDesk certainly prides itself on regularly publishing information about the crypto communities and crypto developments. And you can follow along certain major players that, if you read a little bit, you will get used to seeing their names, even if they're not the authors, they're being talked about. So, Vitalik Buterin, one of the co-founders of the Ethereum project, you'll see his name, and there are other people that are that influential. So you can follow along, you can read. The big benefit to learning about it now is, when you are brand new in a field, for the most part, there are giants in that field.

26:39 Carol Goforth: They have been working, studying, honing their knowledge, not for one or two years, but for decades, and it's incredibly difficult to compete with somebody who has 30 years of experience. Nobody has 30 years of experience in crypto, so it is an area where you can come in and develop an expertise, an awareness, an understanding that puts you on a closer to a level playing field with everybody, other than the people who are actually doing the programming, they are in a world all on their own. But for people who are advisors, and the business people, and the lawyers, and the people who want to be a part of the world without doing the programming, getting in at the bottom field is potentially hugely advantageous. Not necessarily right now, but in a few years, when it becomes even more prevalent.

27:42 Matt Waller: So Carol, what are some future research topics you're gonna work on?

27:47 Carol Goforth: Oh, one of the recent things that I have seen happening is new and innovative ways for companies and groups to disperse their tokens, their crypto assets. You might have heard of air drops, and an air drop is where, at least in theory, someone is gonna develop a crypto asset and then they're just going to drop it into your hand from the air. You have cryptocurrency of some other brand, and for every 10 coins, every one coin, every 1000th of a coin, they're gonna give you this new asset. And what are the legal ramifications of air drops? Are those securities? Do they become securities if, later on, they are being traded for investment purposes? How do we regulate an air drop where it does not fit any of the traditional investment models that we have seen, but can still be a huge advantage for the original promoter, because then you have a huge population, a community that is all invested in seeing that token succeed. So I want to look a little bit at the regulation of things like air drops and other innovations in this space. That's what I wanna do next.

29:17 Matt Waller: Thank you so much for taking time to talk with me about this, I really appreciate it.

29:21 Carol Goforth: It truly has been my pleasure.


29:27 Matt Waller: Thanks for listening to today's episode of the Be EPIC Podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us. You can find current and past episodes by searching Be EPIC podcast, one word, that's B-E-E-P-I-C Podcast. And now, be epic.


Matt WallerMatthew A. Waller is the dean of the Sam M. Walton College of Business, Sam M. Walton Leadership Chair and professor of supply chain management. He is also the host for the Be EPIC Podcast for Walton College.


Walton College's EPIC values -- Excellence, Professionalism, Innovation and Collegiality -- are the heart of Dean Waller’s podcast. Since the beginning of the series, Waller has interviewed business professionals, industry experts, CEOs and Walton College students to bring listeners first-hand accounts directly from the entrepreneurial world.


Waller is an SEC Academic Leadership Fellow and coauthor of “The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain,” published by Pearson Education. He is the former co-editor-in-chief of Journal of Business Logistics. His opinion pieces have appeared in Wall Street Journal Asia and Financial Times.


Waller received an M.S. and Ph.D. from Pennsylvania State University and a B.S.B.A., summa cum laude, from the University of Missouri.

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