diff --git a/cypress/e2e/encryption.cy.ts b/cypress/e2e/encryption.cy.ts
new file mode 100644
index 000000000..478279603
--- /dev/null
+++ b/cypress/e2e/encryption.cy.ts
@@ -0,0 +1,169 @@
+/**
+ * SPDX-FileCopyrightText: 2024 Nextcloud GmbH and Nextcloud contributors
+ * SPDX-License-Identifier: AGPL-3.0-or-later
+ */
+import {
+	addUserToGroup,
+	createGroup,
+	createGroupFolder,
+	deleteGroupFolder,
+	disableEncryption,
+	disableEncryptionModule,
+	disableGroupfoldersEncryption,
+	disableHomeStorageEncryption,
+	enableEncryption,
+	enableEncryptionModule,
+	enableGroupfoldersEncryption,
+	enableHomeStorageEncryption,
+	enterFolder,
+	fileOrFolderExists,
+	PERMISSION_DELETE,
+	PERMISSION_READ,
+	PERMISSION_WRITE,
+} from './groupfoldersUtils'
+
+import {
+	assertFileContent,
+	moveFile,
+} from './files/filesUtils'
+
+import { randHash } from '../utils'
+
+import type { User } from '@nextcloud/cypress'
+
+describe('Groupfolders encryption behavior', () => {
+	let user1: User
+	let groupFolderId: string
+	let groupName: string
+	let groupFolderName: string
+
+	before(() => {
+		enableEncryptionModule()
+		enableEncryption()
+	})
+
+	beforeEach(() => {
+		if (groupFolderId) {
+			deleteGroupFolder(groupFolderId)
+		}
+		groupName = `test_group_${randHash()}`
+		groupFolderName = `test_group_folder_${randHash()}`
+
+		cy.createRandomUser()
+			.then(_user => {
+				user1 = _user
+			})
+		createGroup(groupName)
+			.then(() => {
+				addUserToGroup(groupName, user1.userId)
+				createGroupFolder(groupFolderName, groupName, [PERMISSION_READ, PERMISSION_WRITE, PERMISSION_DELETE])
+			})
+	})
+
+	after(() => {
+		// Restore default values
+		disableGroupfoldersEncryption()
+		enableHomeStorageEncryption()
+		disableEncryption()
+		disableEncryptionModule()
+	})
+
+	it('Move file from encrypted storage to encrypted groupfolder', () => {
+		enableHomeStorageEncryption()
+		enableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', '/file1.txt')
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		moveFile('file1.txt', groupFolderName)
+
+		enterFolder(groupFolderName)
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+
+	it('Move file from encrypted storage to non encrypted groupfolder', () => {
+		enableHomeStorageEncryption()
+		disableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', '/file1.txt')
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		moveFile('file1.txt', groupFolderName)
+
+		enterFolder(groupFolderName)
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+
+	it('Move file from non encrypted storage to encrypted groupfolder', () => {
+		disableHomeStorageEncryption()
+		enableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', '/file1.txt')
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		moveFile('file1.txt', groupFolderName)
+
+		enterFolder(groupFolderName)
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+
+	it('Move file from encrypted groupfolder to encrypted storage', () => {
+		enableHomeStorageEncryption()
+		enableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', `/${groupFolderName}/file1.txt`)
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		enterFolder(groupFolderName)
+		moveFile('file1.txt', '/')
+
+		cy.visit('/apps/files')
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+
+	it('Move file from encrypted groupfolder to non encrypted storage', () => {
+		disableHomeStorageEncryption()
+		enableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', `/${groupFolderName}/file1.txt`)
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		enterFolder(groupFolderName)
+		moveFile('file1.txt', '/')
+
+		cy.visit('/apps/files')
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+
+	it('Move file from non encrypted groupfolder to encrypted storage', () => {
+		enableHomeStorageEncryption()
+		disableGroupfoldersEncryption()
+
+		cy.uploadContent(user1, new Blob(['Content of the file']), 'text/plain', `/${groupFolderName}/file1.txt`)
+
+		cy.login(user1)
+		cy.visit('/apps/files')
+
+		enterFolder(groupFolderName)
+		moveFile('file1.txt', '/')
+
+		cy.visit('/apps/files')
+		fileOrFolderExists('file1.txt')
+		assertFileContent('file1.txt', 'Content of the file')
+	})
+})
diff --git a/cypress/e2e/files/filesUtils.ts b/cypress/e2e/files/filesUtils.ts
index fae7d80ac..2ea28a8c5 100644
--- a/cypress/e2e/files/filesUtils.ts
+++ b/cypress/e2e/files/filesUtils.ts
@@ -94,3 +94,11 @@ export const clickOnBreadcumbs = (label: string) => {
 	cy.get('[data-cy-files-content-breadcrumbs]').contains(label).click()
 	cy.wait('@propfind')
 }
+
+export const assertFileContent = (fileName: string, expectedContent: string) => {
+	cy.intercept({ method: 'GET', times: 1, url: 'remote.php/**' }).as('downloadFile')
+	getRowForFile(fileName).should('be.visible')
+	triggerActionForFile(fileName, 'download')
+	cy.wait('@downloadFile')
+		.then(({ response }) => expect(response?.body).to.equal(expectedContent))
+}
diff --git a/cypress/e2e/groupfoldersUtils.ts b/cypress/e2e/groupfoldersUtils.ts
index c37f84e2e..577d4463e 100644
--- a/cypress/e2e/groupfoldersUtils.ts
+++ b/cypress/e2e/groupfoldersUtils.ts
@@ -57,6 +57,39 @@ export function deleteGroupFolder(groupFolderId: string) {
 	return cy.runOccCommand(`groupfolders:delete ${groupFolderId}`)
 }
 
+export function enableEncryptionModule() {
+	return cy.runOccCommand('app:enable encryption')
+}
+
+export function disableEncryptionModule() {
+	return cy.runOccCommand('app:disable encryption')
+}
+
+export function enableEncryption() {
+	return cy.runOccCommand('config:app:set --value=yes core encryption_enabled')
+}
+
+export function disableEncryption() {
+	return cy.runOccCommand('config:app:delete core encryption_enabled')
+}
+
+export function enableHomeStorageEncryption() {
+	// Default value is enabled
+	return cy.runOccCommand('config:app:delete encryption encryptHomeStorage')
+}
+
+export function disableHomeStorageEncryption() {
+	return cy.runOccCommand('config:app:set --value=0 encryption encryptHomeStorage')
+}
+
+export function enableGroupfoldersEncryption() {
+	return cy.runOccCommand('config:app:set --value=true groupfolders enable_encryption')
+}
+
+export function disableGroupfoldersEncryption() {
+	return cy.runOccCommand('config:app:delete groupfolders enable_encryption')
+}
+
 export function fileOrFolderExists(name: string) {
 	// Make sure file list is loaded first
 	cy.get('[data-cy-files-list-tfoot],[data-cy-files-content-empty]').should('be.visible')
diff --git a/lib/Mount/GroupFolderEncryptionJail.php b/lib/Mount/GroupFolderEncryptionJail.php
new file mode 100644
index 000000000..7f9ce9e1a
--- /dev/null
+++ b/lib/Mount/GroupFolderEncryptionJail.php
@@ -0,0 +1,29 @@
+<?php
+
+declare(strict_types=1);
+/**
+ * SPDX-FileCopyrightText: 2024 Nextcloud GmbH and Nextcloud contributors
+ * SPDX-License-Identifier: AGPL-3.0-or-later
+ */
+
+namespace OCA\GroupFolders\Mount;
+
+use OC\Files\Cache\Wrapper\CacheJail;
+use OC\Files\Storage\Wrapper\Jail;
+
+/**
+ * Jail with overridden behaviors specific to group folders when encryption is
+ * enabled.
+ */
+class GroupFolderEncryptionJail extends Jail {
+	public function getCache($path = '', $storage = null) {
+		if (!$storage) {
+			$storage = $this->getWrapperStorage();
+		}
+		// By default the Jail reuses the inner cache, but when encryption is
+		// enabled the storage needs to be passed to the cache so it takes into
+		// account the outer Encryption wrapper.
+		$sourceCache = $this->getWrapperStorage()->getCache($this->getUnjailedPath($path), $storage);
+		return new CacheJail($sourceCache, $this->rootPath);
+	}
+}
diff --git a/lib/Mount/MountProvider.php b/lib/Mount/MountProvider.php
index 74a1cd4ec..16a406140 100644
--- a/lib/Mount/MountProvider.php
+++ b/lib/Mount/MountProvider.php
@@ -217,11 +217,11 @@ public function getMount(
 			$cacheEntry['permissions'] &= $aclRootPermissions;
 		}
 
-		$baseStorage = new Jail([
-			'storage' => $storage,
-			'root' => $rootPath
-		]);
 		if ($this->enableEncryption) {
+			$baseStorage = new GroupFolderEncryptionJail([
+				'storage' => $storage,
+				'root' => $rootPath
+			]);
 			$quotaStorage = new GroupFolderStorage([
 				'storage' => $baseStorage,
 				'quota' => $quota,
@@ -231,6 +231,10 @@ public function getMount(
 				'mountOwner' => $user,
 			]);
 		} else {
+			$baseStorage = new Jail([
+				'storage' => $storage,
+				'root' => $rootPath
+			]);
 			$quotaStorage = new GroupFolderNoEncryptionStorage([
 				'storage' => $baseStorage,
 				'quota' => $quota,
diff --git a/tests/stub.phpstub b/tests/stub.phpstub
index e0b300368..7f68ac3eb 100644
--- a/tests/stub.phpstub
+++ b/tests/stub.phpstub
@@ -750,9 +750,15 @@ namespace OC\Files\Cache {
 
 namespace OC\Files\Cache\Wrapper {
 	use OC\Files\Cache\Cache;
+	use OCP\Files\Cache\ICache;
+
 	class CacheWrapper extends Cache {
         public function getCache(): Cache {}
 	}
+
+	class CacheJail extends CacheWrapper {
+		public function __construct(?ICache $cache, string $root, ?CacheDependencies $dependencies = null) {}
+	}
 }
 
 namespace OC\Files {