Review the form or subform you're changing. Is there an "Encrypt" field defined in the field designs? Because you're not going to get to "Encrypt" from another translation formula if there is.
If there is an "Encrypt" field defined in the field designs, it has a formula. A translation formula is available for an editable field. A compute formula is available for a computed field. It's either the translation formula or a compute formula.
Depending on which you have,
If it's a translation formula change the translation formula to override its value based on the confidential setting. Yes, it's important to modify the formula so that if the setting doesn't appear -- the formula doesn't override the value.
If it's a compute formula change the compute formula to override its value based on the confidential setting. Yes, it's important to modify the formula so that if the setting doesn't appear -- the formula doesn't override the value.
It's likely the field designed to set the mail type (I assume this is SenderTag, but there are fields defined for its entry) trigger a form refresh, as well. This'll make the "Encrypt" field refresh, at which point it'll change its value.
Make a backup copy of your original design template before attempting changes.