diff --git a/src/core/projectManager.ts b/src/core/projectManager.ts
index 45c6625..f30e583 100644
--- a/src/core/projectManager.ts
+++ b/src/core/projectManager.ts
@@ -1,6 +1,6 @@
 import { existsSync, readFileSync, writeFileSync, mkdirSync } from 'fs';
 import { join, basename } from 'path';
-import { ProjectState, KeepFile, DecryptKey, SyncState, CapyError, ERROR_CODES } from '../types/index';
+import { ProjectState, KeepFile, SyncState, CapyError, ERROR_CODES } from '../types/index';
 
 export class ProjectManager {
   private projectRoot: string;
@@ -11,11 +11,9 @@ export class ProjectManager {
 
   async detectProjectState(): Promise<ProjectState> {
     const keepPath = this.getKeepPath();
-    const decryptPath = this.getDecryptPath();
     const envPath = this.getEnvPath();
 
     const hasKeepFile = existsSync(keepPath);
-    const hasDecryptKey = existsSync(decryptPath);
     const hasEnvFile = existsSync(envPath);
 
     let projectName: string | undefined;
@@ -45,7 +43,6 @@ export class ProjectManager {
     return {
       initialized: hasKeepFile,
       hasKeepFile,
-      hasDecryptKey,
       hasEnvFile,
       projectName,
       organizationId,
@@ -63,10 +60,6 @@ export class ProjectManager {
     return join(this.projectRoot, '.capy');
   }
 
-  getDecryptPath(): string {
-    return join(this.getCapyDir(), 'decrypt');
-  }
-
   getActiveBranchPath(): string {
     return join(this.getCapyDir(), 'branch');
   }
@@ -153,24 +146,6 @@ export class ProjectManager {
     }
   }
 
-  readDecryptKey(): DecryptKey | null {
-    const decryptPath = this.getDecryptPath();
-    if (!existsSync(decryptPath)) {
-      return null;
-    }
-
-    try {
-      const content = readFileSync(decryptPath, 'utf-8');
-      return JSON.parse(content) as DecryptKey;
-    } catch (error) {
-      throw new CapyError(
-        'Failed to read .decrypt file',
-        ERROR_CODES.INVALID_FORMAT,
-        { error, path: decryptPath }
-      );
-    }
-  }
-
   readSyncState(): SyncState | null {
     const syncStatePath = this.getSyncStatePath();
     if (!existsSync(syncStatePath)) {
diff --git a/src/files/fileManager.ts b/src/files/fileManager.ts
index 99bbdc3..77e2c48 100644
--- a/src/files/fileManager.ts
+++ b/src/files/fileManager.ts
@@ -1,6 +1,6 @@
 import { readFileSync, writeFileSync, existsSync, appendFileSync, chmodSync, mkdirSync, unlinkSync } from 'fs';
 import { join, dirname } from 'path';
-import { EnvVariable, KeepFile, DecryptKey, SyncState, CapyError, ERROR_CODES } from '../types/index';
+import { EnvVariable, KeepFile, SyncState, CapyError, ERROR_CODES } from '../types/index';
 import { parse as parseDotenv } from 'dotenv';
 import { Encryptor } from '../crypto/encryptor';
 import { deriveResourceId } from '../crypto/resourceId';
@@ -208,32 +208,6 @@ export class FileManager {
     }
   }
 
-  writeDecryptKey(decryptKey: DecryptKey): void {
-    const capyDir = join(this.projectRoot, '.capy');
-    this.ensureDirectoryExists(capyDir);
-
-    const decryptPath = join(capyDir, 'decrypt');
-    const backup = this.createBackup(decryptPath);
-
-    try {
-      const content = JSON.stringify(decryptKey, null, 2);
-      writeFileSync(decryptPath, content + '\n', { encoding: 'utf-8', mode: 0o600 });
-
-      if (backup) {
-        this.removeBackup(backup);
-      }
-    } catch (error) {
-      if (backup) {
-        this.restoreBackup(backup, decryptPath);
-      }
-      throw new CapyError(
-        'Failed to write decrypt file',
-        ERROR_CODES.PERMISSION_DENIED,
-        { error, path: decryptPath }
-      );
-    }
-  }
-
   writeSyncState(syncState: SyncState): void {
     const capyDir = join(this.projectRoot, '.capy');
     this.ensureDirectoryExists(capyDir);
diff --git a/src/sync/syncEngine.ts b/src/sync/syncEngine.ts
index f1d07ee..9a56605 100644
--- a/src/sync/syncEngine.ts
+++ b/src/sync/syncEngine.ts
@@ -7,7 +7,6 @@ import {
   SyncResult,
   KeepFile,
   KeepVariableEntry,
-  DecryptKey,
   SyncState,
 } from '../types/index';
 
@@ -255,27 +254,6 @@ export class SyncEngine {
     return updatedKeep;
   }
 
-  createDecryptKey(
-    organizationId: string,
-    projectId: string,
-    userId: string,
-    decryptionKey: string,
-    variableNames: string[]
-  ): DecryptKey {
-    const expiresAt = new Date();
-    expiresAt.setDate(expiresAt.getDate() + 30); // 30 days expiration
-
-    return {
-      version: '1.0',
-      org_id: organizationId,
-      project_id: projectId,
-      user_id: userId,
-      decryption_key: decryptionKey,
-      expires_at: expiresAt.toISOString(),
-      permissions: variableNames
-    };
-  }
-
   formatSyncSummary(changeSet: ChangeSet): string {
     const lines: string[] = [];
 
diff --git a/src/types/index.ts b/src/types/index.ts
index a832e21..79b150d 100644
--- a/src/types/index.ts
+++ b/src/types/index.ts
@@ -51,20 +51,9 @@ export interface EnvVariable {
   encrypted: boolean;
 }
 
-export interface DecryptKey {
-  version: string;
-  org_id: string;
-  project_id: string;
-  user_id: string;
-  decryption_key: string;
-  expires_at: string;
-  permissions: string[];
-}
-
 export interface ProjectState {
   initialized: boolean;
   hasKeepFile: boolean;
-  hasDecryptKey: boolean;
   hasEnvFile: boolean;
   projectName?: string;
   organizationId?: string;
diff --git a/tests/commands/branchKeepFile.test.ts b/tests/commands/branchKeepFile.test.ts
index eccadc1..5ebc39f 100644
--- a/tests/commands/branchKeepFile.test.ts
+++ b/tests/commands/branchKeepFile.test.ts
@@ -454,7 +454,6 @@ describe('Direction detection — branch-aware keep_hash', () => {
       getDefaultProjectName: mock(() => 'test-project'),
       getEnvPath: mock(() => '.env'),
       readKeepFile: mock(() => undefined),
-      readDecryptKey: mock(() => undefined),
       readSyncState: mock(() => null),
       readActiveBranch: mock(() => null),
       writeActiveBranch: mock(() => undefined),
@@ -462,7 +461,6 @@ describe('Direction detection — branch-aware keep_hash', () => {
     };
     mockFileManager = {
       writeKeepFile: mock(() => undefined),
-      writeDecryptKey: mock(() => undefined),
       writeSyncState: mock(() => undefined),
       writeEncryptedEnvFile: mock(() => undefined),
       readEnvFile: mock(() => ({})),
@@ -500,7 +498,6 @@ describe('Direction detection — branch-aware keep_hash', () => {
       listProjects: mock(() => Promise.resolve([])),
     };
     mockSyncEngine = {
-      createDecryptKey: mock(() => 'mock-decrypt-key'),
       compareEnvironments: mock(() => undefined),
       formatSyncSummary: mock(() => undefined),
       validateDecisions: mock(() => []),
@@ -541,7 +538,6 @@ describe('Direction detection — branch-aware keep_hash', () => {
     const projectState = {
       initialized: true,
       hasKeepFile: true,
-      hasDecryptKey: true,
       hasEnvFile: true,
       projectName: 'test-project',
       projectId: 'proj-123',
diff --git a/tests/commands/capyCommand.test.ts b/tests/commands/capyCommand.test.ts
index cc284f5..d0a43c1 100644
--- a/tests/commands/capyCommand.test.ts
+++ b/tests/commands/capyCommand.test.ts
@@ -102,7 +102,6 @@ describe('CapyCommand', () => {
       getDefaultProjectName: mock(() => 'test-project'),
       getEnvPath: mock(() => '.env'),
       readKeepFile: mock(() => undefined),
-      readDecryptKey: mock(() => undefined),
       readSyncState: mock(() => null),
       readActiveBranch: mock(() => null),
       writeActiveBranch: mock(() => undefined),
@@ -111,7 +110,6 @@ describe('CapyCommand', () => {
 
     mockFileManager = {
       writeKeepFile: mock(() => undefined),
-      writeDecryptKey: mock(() => undefined),
       writeSyncState: mock(() => undefined),
       writeEncryptedEnvFile: mock(() => undefined),
       readEnvFile: mock(() => ({})),
@@ -152,7 +150,6 @@ describe('CapyCommand', () => {
     } as any;
 
     mockSyncEngine = {
-      createDecryptKey: mock(() => 'mock-decrypt-key'),
       compareEnvironments: mock(() => undefined),
       formatSyncSummary: mock(() => undefined),
       validateDecisions: mock(() => []),
@@ -214,7 +211,6 @@ describe('CapyCommand', () => {
       mockProjectManager.detectProjectState.mockResolvedValue({
         initialized: false,
         hasKeepFile: false,
-        hasDecryptKey: false,
         hasEnvFile: false,
         projectName: undefined,
         projectId: undefined,
@@ -233,7 +229,6 @@ describe('CapyCommand', () => {
       const projectState = {
         initialized: true,
         hasKeepFile: true,
-        hasDecryptKey: true,
         hasEnvFile: true,
         projectName: 'test-project',
         projectId: 'proj-123',
@@ -253,7 +248,6 @@ describe('CapyCommand', () => {
       mockProjectManager.detectProjectState.mockResolvedValue({
         initialized: true,
         hasKeepFile: true,
-        hasDecryptKey: false,
         hasEnvFile: false,
         projectName: 'existing-project',
         projectId: 'proj-123',
@@ -736,7 +730,6 @@ describe('CapyCommand', () => {
     const mockProjectState = {
       initialized: true,
       hasKeepFile: true,
-      hasDecryptKey: true,
       hasEnvFile: true,
       projectName: 'test-project',
       projectId: 'proj-123',
@@ -834,7 +827,6 @@ describe('CapyCommand', () => {
     const mockProjectState = {
       initialized: true,
       hasKeepFile: true,
-      hasDecryptKey: true,
       hasEnvFile: true,
       projectName: 'test-project',
       projectId: 'proj-123',
@@ -1055,7 +1047,6 @@ describe('CapyCommand', () => {
     const mockProjectState = {
       initialized: true,
       hasKeepFile: true,
-      hasDecryptKey: true,
       hasEnvFile: true,
       projectName: 'test-project',
       projectId: 'proj-123',
diff --git a/tests/core/projectManager.test.ts b/tests/core/projectManager.test.ts
index fbd2084..6c3eb4d 100644
--- a/tests/core/projectManager.test.ts
+++ b/tests/core/projectManager.test.ts
@@ -29,7 +29,6 @@ describe('ProjectManager', () => {
     test('should detect uninitialized project when no keep.lock file exists', async () => {
       mockExistsSync.mockImplementation((path) => {
         if (path === join(testRoot, 'keep.lock')) return false;
-        if (path === join(testRoot, '.capy/decrypt')) return false;
         if (path === join(testRoot, '.env')) return true;
         return false;
       });
@@ -39,7 +38,6 @@ describe('ProjectManager', () => {
       expect(state).toMatchObject({
         initialized: false,
         hasKeepFile: false,
-        hasDecryptKey: false,
         hasEnvFile: true,
         activeBranch: 'development',
       });
@@ -56,7 +54,6 @@ describe('ProjectManager', () => {
 
       mockExistsSync.mockImplementation((path) => {
         if (path === join(testRoot, 'keep.lock')) return true;
-        if (path === join(testRoot, '.capy/decrypt')) return true;
         if (path === join(testRoot, '.env')) return true;
         return false;
       });
@@ -68,7 +65,6 @@ describe('ProjectManager', () => {
       expect(state).toMatchObject({
         initialized: true,
         hasKeepFile: true,
-        hasDecryptKey: true,
         hasEnvFile: true,
         projectName: 'test-project',
         organizationId: 'org_123',
@@ -270,11 +266,6 @@ describe('ProjectManager', () => {
       expect(path).toBe(join(testRoot, 'keep.lock'));
     });
 
-    test('should return correct decrypt path', () => {
-      const path = (projectManager as any).getDecryptPath();
-      expect(path).toBe(join(testRoot, '.capy/decrypt'));
-    });
-
     test('should return correct env path', () => {
       const path = (projectManager as any).getEnvPath();
       expect(path).toBe(join(testRoot, '.env'));
diff --git a/tests/files/fileManager.test.ts b/tests/files/fileManager.test.ts
index 0ff166c..10f9a55 100644
--- a/tests/files/fileManager.test.ts
+++ b/tests/files/fileManager.test.ts
@@ -21,7 +21,7 @@ afterAll(() => { mock.restore(); });
 
 import { join, dirname } from 'path';
 import { FileManager } from '../../src/files/fileManager';
-import { KeepFile, DecryptKey, CapyError, ERROR_CODES } from '../../src/types/index';
+import { KeepFile, CapyError, ERROR_CODES } from '../../src/types/index';
 
 describe('FileManager', () => {
   let fileManager: FileManager;
@@ -222,53 +222,9 @@ describe('FileManager', () => {
     });
   });
 
-  describe('writeDecryptKey', () => {
-    test('should write decrypt key with secure permissions', () => {
-      const decryptKey: DecryptKey = {
-        version: '1.0',
-        org_id: 'org_123',
-        project_id: 'proj_456',
-        user_id: 'user_789',
-        decryption_key: 'key_abc',
-        expires_at: '2024-02-01T00:00:00Z',
-        permissions: ['VAR1', 'VAR2']
-      };
-
-      mockExistsSync.mockReturnValue(false); // No backup needed
-
-      fileManager.writeDecryptKey(decryptKey);
-
-      expect(mockWriteFileSync).toHaveBeenCalledWith(
-        join(testRoot, '.capy/decrypt'),
-        JSON.stringify(decryptKey, null, 2) + '\n',
-        { encoding: 'utf-8', mode: 0o600 }
-      );
-    });
-
-    test('should handle write failure with error throwing', () => {
-      const decryptKey: DecryptKey = {
-        version: '1.0',
-        org_id: 'org_123',
-        project_id: 'proj_456',
-        user_id: 'user_789',
-        decryption_key: 'key_abc',
-        expires_at: '2024-02-01T00:00:00Z',
-        permissions: []
-      };
-
-      mockExistsSync.mockReturnValue(false);
-      mockWriteFileSync.mockImplementation(() => {
-        throw new Error('Permission denied');
-      });
-
-      expect(() => fileManager.writeDecryptKey(decryptKey)).toThrow(CapyError);
-      expect(() => fileManager.writeDecryptKey(decryptKey)).toThrow('Failed to write decrypt file');
-    });
-  });
-
   describe('updateGitignore', () => {
     test('should add new entries to .gitignore', () => {
-      const entries = ['.env', '.capy/decrypt'];
+      const entries = ['.env'];
       mockExistsSync.mockReturnValue(false); // No existing .gitignore
 
       fileManager.updateGitignore(entries);
@@ -280,14 +236,14 @@ describe('FileManager', () => {
       );
       expect(mockAppendFileSync).toHaveBeenCalledWith(
         join(testRoot, '.gitignore'),
-        '.env\n.capy/decrypt\n',
+        '.env\n',
         'utf-8'
       );
     });
 
     test('should not add duplicate entries', () => {
-      const entries = ['.env', '.capy/decrypt'];
-      const existingContent = '.env\nnode_modules\n.capy/decrypt\n';
+      const entries = ['.env'];
+      const existingContent = '.env\nnode_modules\n';
 
       mockExistsSync.mockReturnValue(true);
       mockReadFileSync.mockReturnValue(existingContent);
@@ -299,7 +255,7 @@ describe('FileManager', () => {
     });
 
     test('should add only missing entries', () => {
-      const entries = ['.env', '.capy/decrypt', '.capy/token'];
+      const entries = ['.env', '.capy/token'];
       const existingContent = '.env\nnode_modules\n';
 
       mockExistsSync.mockReturnValue(true);
@@ -314,7 +270,7 @@ describe('FileManager', () => {
       );
       expect(mockAppendFileSync).toHaveBeenCalledWith(
         join(testRoot, '.gitignore'),
-        '.capy/decrypt\n.capy/token\n',
+        '.capy/token\n',
         'utf-8'
       );
     });
diff --git a/tests/integration/cliIntegration.test.ts b/tests/integration/cliIntegration.test.ts
index 0275c96..8757778 100644
--- a/tests/integration/cliIntegration.test.ts
+++ b/tests/integration/cliIntegration.test.ts
@@ -6,7 +6,7 @@ import { SyncEngine } from '../../src/sync/syncEngine';
 import { PromptEngine } from '../../src/ui/promptEngine';
 import { AuthService } from '../../src/auth/authService';
 import { ServiceClient } from '../../src/service/serviceClient';
-import { CapyError, KeepFile, DecryptKey } from '../../src/types/index';
+import { CapyError, KeepFile } from '../../src/types/index';
 import * as fs from 'fs';
 
 // Integration tests - testing components working together without full mocking
@@ -44,7 +44,6 @@ describe('CLI Integration Tests', () => {
       // Mock file system operations since we're not actually creating files
       spyOn(fs, 'existsSync').mockImplementation((path: any) => {
         if (path.includes('keep.lock')) return false;
-        if (path.includes('.capy/decrypt')) return false;
         if (path.includes('.env')) return true;
         return false;
       });
@@ -54,7 +53,6 @@ describe('CLI Integration Tests', () => {
       expect(state).toMatchObject({
         initialized: false,
         hasKeepFile: false,
-        hasDecryptKey: false,
         hasEnvFile: true,
         activeBranch: 'development',
       });
@@ -71,7 +69,6 @@ describe('CLI Integration Tests', () => {
 
       spyOn(fs, 'existsSync').mockImplementation((path: any) => {
         if (path.includes('keep.lock')) return true;
-        if (path.includes('.capy/decrypt')) return true;
         if (path.includes('.env')) return true;
         return false;
       });
@@ -83,7 +80,6 @@ describe('CLI Integration Tests', () => {
       expect(state).toMatchObject({
         initialized: true,
         hasKeepFile: true,
-        hasDecryptKey: true,
         hasEnvFile: true,
         projectName: 'test-project',
         organizationId: 'org_123',
@@ -135,27 +131,6 @@ DEBUG=true`;
       );
     });
 
-    test('should create decrypt key with secure permissions', () => {
-      const mockDecryptKey: DecryptKey = {
-        version: '1.0',
-        org_id: 'org_123',
-        project_id: 'proj_456',
-        user_id: 'user_789',
-        decryption_key: 'decrypt_key_abc',
-        expires_at: new Date(Date.now() + 30 * 24 * 60 * 60 * 1000).toISOString(),
-        permissions: ['API_KEY', 'DB_URL']
-      };
-
-      const writeFileSyncSpy = spyOn(fs, 'writeFileSync').mockImplementation(() => {});
-
-      fileManager.writeDecryptKey(mockDecryptKey);
-
-      expect(writeFileSyncSpy).toHaveBeenCalledWith(
-        expect.stringContaining('.capy/decrypt'),
-        JSON.stringify(mockDecryptKey, null, 2) + '\n',
-        { encoding: 'utf-8', mode: 0o600 }
-      );
-    });
   });
 
   describe('Sync Engine Integration', () => {
@@ -343,33 +318,6 @@ DEBUG=true`;
     });
   });
 
-  describe('Decrypt Key Creation Integration', () => {
-    test('should create valid decrypt key with proper expiration', () => {
-      const orgId = 'org_123';
-      const projectId = 'proj_456';
-      const userId = 'user_789';
-      const decryptionKey = 'decrypt_key_abc';
-      const permissions = ['API_KEY', 'DB_URL'];
-
-      const decryptKey = syncEngine.createDecryptKey(orgId, projectId, userId, decryptionKey, permissions);
-
-      expect(decryptKey.version).toBe('1.0');
-      expect(decryptKey.org_id).toBe(orgId);
-      expect(decryptKey.project_id).toBe(projectId);
-      expect(decryptKey.user_id).toBe(userId);
-      expect(decryptKey.decryption_key).toBe(decryptionKey);
-      expect(decryptKey.permissions).toEqual(permissions);
-
-      // Verify expiration is approximately 30 days from now
-      const expiresAt = new Date(decryptKey.expires_at);
-      const expectedExpiration = new Date();
-      expectedExpiration.setDate(expectedExpiration.getDate() + 30);
-      
-      const timeDiff = Math.abs(expiresAt.getTime() - expectedExpiration.getTime());
-      expect(timeDiff).toBeLessThan(1000); // Less than 1 second difference
-    });
-  });
-
   afterEach(() => {
     // Clean up mocks
     jest.restoreAllMocks(); // Bun supports this via jest global
diff --git a/tests/sync/syncEngine.test.ts b/tests/sync/syncEngine.test.ts
index 40f9974..abc8738 100644
--- a/tests/sync/syncEngine.test.ts
+++ b/tests/sync/syncEngine.test.ts
@@ -395,33 +395,6 @@ describe('SyncEngine', () => {
     });
   });
 
-  describe('createDecryptKey', () => {
-    test('should create decrypt key with proper structure', () => {
-      const orgId = 'org_123';
-      const projectId = 'proj_456';
-      const userId = 'user_789';
-      const decryptionKey = 'decrypt_key_abc';
-      const permissions = ['VAR1', 'VAR2'];
-
-      const result = syncEngine.createDecryptKey(orgId, projectId, userId, decryptionKey, permissions);
-
-      expect(result.version).toBe('1.0');
-      expect(result.org_id).toBe(orgId);
-      expect(result.project_id).toBe(projectId);
-      expect(result.user_id).toBe(userId);
-      expect(result.decryption_key).toBe(decryptionKey);
-      expect(result.permissions).toEqual(permissions);
-      expect(result.expires_at).toBeDefined();
-      
-      // Check that expiration is 30 days from now
-      const expiresAt = new Date(result.expires_at);
-      const expectedExpiration = new Date();
-      expectedExpiration.setDate(expectedExpiration.getDate() + 30);
-      
-      expect(Math.abs(expiresAt.getTime() - expectedExpiration.getTime())).toBeLessThan(1000);
-    });
-  });
-
   describe('formatSyncSummary', () => {
     test('should format comprehensive sync summary', () => {
       const changeSet: ChangeSet = {