Coherent optical signal processors, due to their ability to process and relay information in two dimensions, have been receiving increasing attention in recent years. These systems involve a coherent field being propagated through some bulk optical system consisting of thin lenses and sections of free space (such paraxial systems being described mathematically using the Linear Canonical Transformation). A Spatial Light Modulator (SLM) may be used to modulate the input digital data onto a coherent wave-field as well as to modulate the amplitude and/or phase of the complex wave-field at any desired plane. The complex field (amplitude and phase) at any desired plane may be recorded quantitatively using a CCD camera, using digital holographic techniques allowing the further processing of data digitally. Such hybrid optoelectronic systems have applications for 2D and 3D data processing covering fields as diverse as data storage, data security and pattern recognition. But devices such as SLMs and CCD cameras can represent only discrete levels of data necessitating a quantisation of continuous valued analog information. In this paper, we take the example of an optical system used to encrypt 2D and 3D data and evaluate the effect of the finite discrete levels of an SLM on the encryption/decryption process.© (2005) COPYRIGHT SPIE--The International Society for Optical Engineering. Downloading of the abstract is permitted for personal use only.