In this paper we present a new quaternion-based encryption technique for color images. In the proposed encryption method, images are written as quaternions and are rotated in a three-dimensional space around another quaternion, which is an encryption key. The encryption process uses the cipher block chaining (CBC) mode. Further, this paper shows that our encryption algorithm enables digital fingerprinting as an additional feature. This feature follows from some artifacts which occur in the decrypted image. These artifacts can be maintained at such a low level that they remain imperceptible to the human eye and unique for each key. These artifacts are considered to be users’ fingerprints and can be used to identify pirates in the event of illegal redistribution of multimedia data. Identification of pirates is performed in the form of non-blind detection. The purpose of this paper is to report a new approach to digital fingerprinting and to point out the method’s existing flaws which need future research. A computer-based simulation was conducted to examine the potential of our quaternion encryption scheme for the implementation of digital fingerprinting.