This stuff is gorgeous and legal. It is only illegal to deface or destroy money if you do it with the intent to defraud.
I had a friend who was a manager at a grocery store in a smallish town. Once someone sliced up 1s and 20s to get Washington's picture with $20 symbols to either side. They told the cashier their kids had been playing with the scissors and she accepted the bills. They then turned their original 20s into a bank with the same sob story and got new bills to replace them. That would have been way illegal.