A payment service called X Money being prepared by Elon Musk’s X, formerly Twitter, is expected to shake up the U.S. payments market. Some also point out that plans to link cryptocurrency payments and provide returns on user deposits could run into regulatory barriers.

On April 16 local time, The Block Crypto reported that analysts at Japanese financial firm Mizuho Research said X Money could put direct pressure on PayPal and Venmo.

Mizuho viewed X Money as financial infrastructure underpinning X’s “everything app” strategy. Analysts Dan Dolev and Andrew Jenkins said in an investor memo that X Money is expected to launch in April. They said it aims for a model similar to Asia’s WeChat Pay and Alipay by bundling messaging, banking services, yield and commerce features. They also said X has reach with 500 million to 600 million monthly active users and that Musk is a PayPal co-founder, giving it the potential to disrupt the U.S. payments market.

Reflecting these factors, Mizuho downgraded its rating on PayPal stock to neutral. It cited that PayPal and Venmo are exposed to the most direct risk of being substituted at the entry points of person-to-person transfers and digital wallets that X is targeting. The view was that X Money could be a tool to expand X beyond a simple add-on into a platform that combines financial functions.

Regulatory variables also loom. Mizuho said a CRYPTO bill recently introduced in New York could complicate X Money’s plans to integrate cryptocurrency payments. It also said the bill would make unlicensed virtual currency business activity in the state subject to criminal punishment, adding that it “increases the burden on X’s potential and long-term cryptocurrency integration plans.”

Another variable is the CLARITY bill. The bill is being discussed as possibly limiting the scope for non-bank financial platforms to offer yield-bearing services. Mizuho cited X Money’s proposal to provide a 6 percent annual return on cash balances and said, “The timing of launching X Money’s 6 percent annual percentage yield (APY) is especially sensitive.” Whether users will be able to receive a set return or reward when holding cryptocurrencies, especially stablecoins, has emerged as a key issue in discussions over the CLARITY bill.

Against that backdrop, X has continued moves to expand its financial functions. This week, X introduced a Cashtags feature that allows users to check stock- and cryptocurrency-related financial data directly on their timelines. It is being read as part of a plan to link everything from checking information to payments and storing funds within X.

Ultimately, the success or failure of X Money has become harder to determine based solely on its user base and platform scalability. The likelihood of pressuring PayPal and Venmo in the U.S. payments market has increased, but the actual scope of implementing core functions such as cryptocurrency payment linkage and yield provision could vary depending on state-by-state regulation and federal legislative discussions.