“Whoever mutilates, cuts, defaces, disfigures, or perforates, or unites or cements together, or does any other thing to any bank bill, draft, note, or other evidence of debt issued by any national banking association, or Federal Reserve bank, or the Federal Reserve System, with intent to render such bank bill, draft, note, or other evidence of debt unfit to be reissued, shall be fined under this title or imprisoned not more than six months, or both.”
The law didn’t stop Sonya Clark from embroidering an afro on a five dollar bill in her Afro Abe series, or Ivan Duval and Jean Sebastien Ides from having way too much fun with one dollar bills. Once again, it seems the law looks the other way. In this case, the key words in the statute are “render such band bill … unfit to be reissued.” Even with a giant black ‘fro on Lincoln, a five-dollar bill is still recognizable and could be swapped out, should anyone want to trade the $1200 artwork for crisp clean legal tender.
So long as an activity doesn’t render a bill unfit to be reissued, the law usually doesn’t have much of a problem with it. Conterfeiting and defacement of currency falls under the purview of the Secret Service, which is cool. Yet defacing dollar bills to creatively express onesself isn’t quite as popular as defacing coins anyways, perhaps partly due to the higher costs incurred if one tears a bunch of twenties in half.
Some states and companies produce “overlaid” or “enhanced” bills, which avoid the wrath of the Secret Sevice by using stickers rather than really doing anything to the underlying bill. Moneygami is probably okay, too, so long as you leave the underlying bill in unaltered condition.
On the other hand, defacing money for commercial purposes, like advertising, is strictly prohibited. Statute 18 USC 475 states, “[w]hoever … makes … or … uses any business or professional card, notice, placard, circular, handbill, or advertisement in the likeness … of any [coin or currency] of the United States … or writes, prints, or otherwise impresses upon or attaches to any [coin or currency] of the United States, any business or professional card, notice, or advertisement, or any notice or advertisement whatever, shall be fined under this title.”
If you’re still curious about the legal nuances of defacing bills and mutilating coins, check out Google Answers. For a rule of thumb – if you’re an artist, the government isn’t going to come after you, especially if you’re a judgment proof starving artist type. But don’t go around melting coins for metal or stamping your company logo on dollar bills. That’s just asking for trouble.