The CP System III became the final arcade system board to be ever designed by Capcom. It features a security mechanism; games are supplied on a CD, which contains the encrypted game contents, and a security cartridge containing the game BIOS and the SH-2 CPU with integrated decryption logic, with the per-game key stored in battery-backed SRAM. Capcom chose the CD medium in order to keep down the price of the system. When the CP System III board is first powered on, the contents of the CD are loaded into a bank of SIMMs on the motherboard, where it is executed. The program code is then decrypted at run time via the security cartridge. The security cartridge is sensitive to any sort of tampering, which will result in the decryption key being erased and the cartridge being rendered useless. Games become unplayable when the battery inside the security cartridge dies. The lone exception is Street Fighter III: 2nd Impact, which uses a default set of decryption keys that are written to dead cartridges on boot.
In June 2007, the encryption method was reverse-engineered by Andreas Naive, making emulation possible.