United States currency and coinage are governed by federal law through the U.S. Treasury Department. Generally, it is illegal to fraudulently deface, mutilate, impair, diminish, falsify, scales or lightens any coins minted or "coined" in the United States or any foreign coins which are by law made current or are in use or circulation as money within the U.S. (18 U.S.C. 331)

It is also a crime to fraudulently possess, pass, publish, sell or attempt to possess, pass, publish, sell or bring into the U.S. any such coin with knowledge that the coin has been altered, mutilated, defaced, etc. (18 U.S.C. 331)

Defacing currency with the intent to alter the bill to gain a benefit is illegal. If someone alters a written instrument (such as a check) without permission and with the intent to gain a benefit, then it is called forgery, which is a crime. If one tried to alter a cash bill (like changing a $5 bill to a $20 bill) for the purpose of presenting the altered bill to gain a benefit, then that could be considered a forgery. Forgery of United States Currency in this manner is called counterfeiting and carries with it very stiff penalties.

See also Speak Up! Other #370 - What are the consequences for being found guilty of counterfeiting?