It's been a rough month for the Zip Co Ltd (ASX: ZIP) share price.

How rough?

Well, on 6 January, the S&P/ASX 200 Index (ASX: XJO) buy now, pay later (BNPL) stock was trading for $3.19. In afternoon trade today, those same shares are changing hands for $2.21 apiece. That sees the BNPL stock down 31% in a month.

However, I should note that even following that big slide, the Zip share price is up 179% since this time last year.

Now, much of the past month's pain was delivered on 30 January, when shares crashed by 25.4%. This followed the release of Zip's December quarter results.

While the company achieved a 50.2% year over year increase in cash earnings before taxes, depreciation and amortisation (EBTDA) to $35.3 million, this fell short of some more optimistic analyst forecasts.

ASX 200 investors also look to have punished the stock amid a retrace in margins, with Zip's revenue margin sliding to 7.9% from 8.2% reported in the prior corresponding period.

Turning the clock forward to this week, the Zip share price closed down 3.0% yesterday and is down another 3.5% today at $2.18.

The renewed selling pressure looks to be driven by new regulations on the BNPL industry set to be finalised by the Australian Government.

BNPL regulations hitting Zip share price

According to the government's draft report, the new regulations that are throwing up headwinds for the Zip share price this week "aim to regulate BNPL in a way that is flexible, adaptable and proportionate to the risk of consumer harm".

So, just how does the government intend to do this?

Stephen Jones, Assistant Treasurer and Minister for Financial Services, explained that the key provisions of the BNPL reforms include:

• Clear obligations on BNPL providers to conduct affordability checks, ensure responsible lending practices, and implement mechanisms to identify vulnerable consumers.
• Enhanced requirements for transparency in fees and charges, ensuring Australians are fully informed of the cost of BNPL products, in addition to setting fee caps on BNPL.
• BNPL providers will be held to consistent standards, creating a level playing field and providing certainty for industry to invest and innovate.

The government is accepting feedback on the new regulations until 12 February.

While these new regulations could take a bite out of Zip's profits in its Australian market, the Zip share price should get some support from the company's large and growing footprint in the massive United States BNPL space.

In the December quarter, Zip's total transaction value (TTV) in the US grew by 38.3% while its US revenue surged by 41.0%.