I think that the only way to change or remove the encryption key from a HSQLDB database is to follow a procedure similar to the one explained in this other question, where an encryption key is added.
What are the steps that are needed to instead change (or remove altogether) the encryption key?
This can be done easily. Use the SQL statement, SCRIPT <filename.script> to save the database as a script. You can then connect to the database named filename.