This looks like another Mt. Gox situation, so it's likely things will be better in the long run after the dust settles. But I'm not so sure, especially when governments are now seeing crypto as a threat to the existence of Fiat (something they didn't think about when crypto was in its early years).
It actually depends on what kind of regulation. If more and more people choose to have self-custody, then it is good since, in a truly decentralized coin, it will wholly benefit the user itself. So, the kind of regulation that isn't specifically attempt to harshly control the user-side interaction with cryptocurrency, it won't be too concerning.
The problem is, IIRC, there was a regulation attempt where crypto wallet developers are forced to implement an address verification mechanism that will be tied to personally identifiable information. I forgot the exact issue, but I'm sure at some point it has been talked about. With that in mind, then surely this kind of draconian regulation will harm crypto, especially those who do not have strong decentralized roots community.