Phrased differently, can an encrypted malware still act ? Not encrypted by design, but after the fact. And can it still be detected by an antivirus when in encrypted form ? (Given it is in decrypted form)
It would not be able to execute. It would need to be decrypted first.
It would probably not be picked up by an anti-virus as the signature would not match the know signature, and the anti-virus would not be able to decrypt it.