> Can I melt, drill holes through, or mutilate U.S. coins?

> Maybe. It is a violation of 18 U.S.C. § 331 to alter a U.S. or foreign coin with the intent to defraud. The United States Mint cannot issue interpretations of criminal statutes such as this, which fall within the jurisdiction of the U.S. Department of Justice. Furthermore, 31 C.F.R. Part 82 states that no person shall export, melt or treat any 5-cent coin or one-cent coin of the United States. However, there are a few exceptions such as for novelty, amusement, educational, jewelry and similar purposes. Your business should consult with an attorney to ensure it does not run afoul of these laws before melting or mutilating U.S. coins.

And yes, it's still a coin if it’s out of circulation. A few years ago I decided that saving my old Eisenhower dollars was not worthwhile. The local Panera Bread took it without a problem. I think the cashier thought it was a neat to see an unusual coin.

* evidently, these are the most common “silver” silver dollars, but that’s another story.

I do not know about Paper Money, but I am 99.9999% sure all paper currency issued by the Federal Gov. is Legal Tender. But IIRC, some are illegal to own, like the 100,000 note.