I've found two issues after looking into this in more detail.

The first is that the "cxf-ut-encrypted" STS configuration shipped with
Fediz does not in fact encrypt the issued token due to a missing
configuration line. I've merged a fix for this here:

http://svn.apache.org/viewvc?view=revision&revision=1363393

Secondly, the Symmetric holder-of-key use-case, where the symmetric key is
encrypted with the certificate of the service provider, does not use the
EncryptionProperties.getKeyWrapAlgorithm as you might expect, but always
uses the default RSA 1.5 algorithm. I've fixed this as well:

https://issues.apache.org/jira/browse/CXF-4436
http://svn.apache.org/viewvc?view=revision&revision=1363394

I can't reproduce the decryption error you're seeing though. Could you
upgrade your JDK to the latest 1.6.x and apply the unlimited security
policies, and try again using the latest CXF SNAPSHOT code?

Colm.

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