SHDM stands for Sphere Hardening Dither Modulation and is a watermarking algorithm based on quantizing the norm of a vector extracted from the cover work. We show how SHDM can be integrated into a fully commutative watermarking encryption scheme and investigate implementations in the spatial, DCT- and DWT-domain with respect to their delity, robustness, capacity and security of encryption. The watermarking scheme, when applied in the DCT- or DWT-domain, proves to be very robust against JPEG/JPEG2000 compression. On the other hand, the spatial domain-based approach offers a large capacity. The increased robustness of the watermarking schemes, however, comes at the cost of rather weak encryption primitives, making the proposed CWE scheme suited for low - medium security applications with high robustness requirements.