I’m unsure whether people would assume you had robbed a bank, I think this would depend largely on your character / build. I know for a fact that if I did this, no one in my life would assume or think for a second that I had done that.

Would this be legal? Is there anything preventing you from dying currency, if there is no intention or act of counterfeiting?

Depends where you are but in a large number of countries it’s illegal to deface currency. (This doesn’t change the fact that people do deface it and I’ve never heard of anyone getting in trouble for it).

Shop owner’s can also say no if your notes are too busted, I’ve had this happen before trying to purchase with bills which have a tear.

And I’m assuming anywhere else that microsoft operates (the entire world) would be the same too, no? I don’t know why this rhetoric would be specific to the EU.