How Illegal is it to Deface Money?

A popular machine to be found at theme parks such as Disney or Six Flags are small machines you place a coin in, generally a penny, and then you watch and the machine flattens, stretches, and defaces the coin with some sort of company logo. You then get the penny back as a cheap souvenir. However maybe somewhere in your mind you recall that defacing money is illegal? Or perhaps if you have a very brainy mind you recall:

"Whoever fraudulently alters, defaces, mutilates, impairs, diminishes, falsifies, scales, or lightens any of the coins coined at the mints of the United States, or any foreign coins which are by law made current or are in actual use or circulation as money within the United States; or whoever fraudulently possesses, passes, utters, publishes, or sells, or attempts to pass, utter, publish, or sell, or brings into the United States, any such coin, knowing the same to be altered, defaced, mutilated, impaired, diminished, falsified, scaled, or lightened- Shall be fined under this title or imprisoned not more than five years, or both."

Which is of course part of United States Code 18.

So how are such machines allowed to be used?

The interpretation of laws is sometimes as tricky as the person who is interpreting them. However, many companies or individuals choose to look at the law and the usage of the word "fraudulently" as a means of justifying their machines. The people involved with such money defacing do not feel that their machine is in any way being used to purposefully defraud the government or the treasury system in any way. Another loop hole that some people who have defaced money for art and other purposes likes to claim as justification is the line about money in current circulation. If you have altered and basically destroyed the coin then it probably isn't going to work in circulation and therefore is not a coin "in circulation." However, how that one tip toes back and forth over the defacing having been the reason for the fall from circulation is another quirk of interpretation.

Coins used to be made out of more precious metals, like silver. Therefore, if you were to deface a coin by say drilling a hole through it, to most people the coin has lost some of its face value since less of the silver is there. This made repairing coins a costly process for the government, however, due to the softness of precious metals coins were more susceptible to wear and tear any way. Thus the usage of precious metals has been reduced and discontinued with most coins being made of alloy mixtures, primarily copper; followed by nickel. These days coins are worth less than their actual face value and therefore it is not high on the Government priority list to enforce or really care much about the defacing of said coinage. A similar stance is held on dollar bills.

Therefore, in conclusion, if you deface money in a way to gain some sort of profit or to alter the bill such as make a 5 a 10, then you are committing a felony that is going to be pursued if discovered. However, for those out there stamping a smiley face or two on a dollar bill, or beating your pennies into pancakes with a hammer: Uncle Sam has bigger fish to fry. Those who are making art or fashion statements with their coins, most likely would not fall into trouble, but you are not likely to ever see someone trying to mass market a clothing line with defaced money on it because that would fall more under the illegal side of things.