Yes it can. But then use of the index will only be made if you write the query to provide the encrypted value for comparison rather than the clear value.
If you do the latter, it will not be able to use the index or at best will have to scan the whole index, decrypting every value to do the matching.
which feature may be used to enable data encryption ?
Roles, Profiles, column-level security, user defined functions (UDF), X views in the Data Dictionary
Depending on the version of TD you are using, you may be able to collect stats on the expression for the decryption of the column which could help with performance.
--Searching on decrypted index (expression stats)