Unused PVC pipe nub sticking out of wall — can I recess it or cap it behind drywall?

Working on a room that was an add-on from the 70s or 80s. We're removing wood paneling and plan to float/texture the drywall underneath for a cleaner finish. Problem: there's a short nub of what looks like PVC pipe poking out of the wall with no apparent purpose.

My best guess is it might be an old exterior drain line that was abandoned when the addition was built, but I honestly don't know. It doesn't seem to be connected to anything active — no water comes out and it's been this way as long as we've owned the house.

A few questions:

1. Can we cap it and recess it behind the wall so it's not visible?
2. Are there any risks or code issues with having capped plumbing inside a finished wall?
3. Anything I should check before assuming it's truly abandoned/unused?

https://imgur.com/a/fACYUJP