Is there a way to encrypt design under Quartus?

You don't really test a QXP file. Before you even export your design as QXP, you first synthesise, place, route, and assemble your design. Then test it (usually a .sof file) on a board. You do this independently from your partner or co-designers.

When you think your design is good enough for integrating into your co-designers design, you export it as a partition (QXP) and tell your co-worker to import it into their Quartus. He will then integrate the partition into his full Quartus design, and perform the full synthesis, place & route, and design assembly flow. His final .sof file will be the integrated design that he can test on his board.

-daniel