Ministers should legislate to cap political donations to “rebuild voter confidence” in democracy, campaigners have said before the introduction of a landmark elections bill.

The government is being urged to show more ambition as it prepares to publish legislation early next year that will extend the franchise to 16- and 17-year-olds.

In a letter sent this week to Steve Reed, the communities secretary, and Samantha Dixon, the democracy minister, 19 civil organisations said “a donations cap is the best way to protect our democracy and to rebuild voter confidence in the system”.

Its signatories include the Electoral Reform Society, Transparency International UK, Hope not Hate and the UK Anti-Corruption Coalition.

The call comes weeks after Nigel Farage’s Reform UK declared it had received £9m from the Thailand-based crypto investor Christopher Harborne, the largest donation made by a living person to a British political party.

As well as reducing the voting age to 16, ministers are planning to use the elections bill to reduce loopholes in political finance.

Last summer, the government said it would tighten the rules around political donations from shell companies and unincorporated associations and empower the Electoral Commission to issue much bigger fines – increasing the maximum from £20,000 to £500,000.

The campaigners’ letter called on the government to use the bill to ban political donations made in cryptocurrency, after similar action taken by Ireland and Brazil.

The Guardian reported this month that ministers were exploring doing so amid growing concerns that cryptocurrency donations endanger the integrity of the electoral system because it is difficult to establish where they come from. Farage’s party became the first to accept donations in crypto earlier this year.

Pat McFadden, the work and pensions secretary, said in July that banning cryptocurrency donations was “definitely something that the Electoral Commission should be considering” and that it was “very important that we know who is providing the donation”.

However, ministers have so far shied away from legislating to limit political donations after last year assessing a proposal by the Institute for Public Policy Research for a £100,000 cap.

Like other major parties, Labour relies on private fundraising to fund its campaigns. Its biggest donors in recent years have included the former Autoglass boss Gary Lubner and the green energy entrepreneur Dale Vince.

The letter also called on ministers to legislate to introduce automatic voter registration, which is being piloted in Wales. The measure, which Labour officials have been exploring since they were in opposition, would mean voters are added to the electoral roll automatically without needing to actively register.

Campaigners say the move would improve voter turnout and increase electoral participation by renters and people from poorer socioeconomic backgrounds, who are less likely to be registered to vote.

Finally, the letter urged ministers to safeguard the Electoral Commission’s independence after the Conservatives legislated to allow ministers to set strategy and policy for the regulator.

The signatories warned that the Tory move “creates serious risks of interference and political capture” and that “while it may seem politically expedient to maintain this power while in government, it is essential that independence be returned”.

Campaign groups that signed the letter to Reed and Dixon included Generation Rent, The 99% Organisation, Make Votes Matter, the Black Equity Organisation and the website Byline Times.

A Transparency International report concluded that in 2023, £56.6m in donations – 66% of the total coming from private sources – came from 19 mega-donors.

An MHCLG spokesperson said: “Our elections strategy sets out tough new rules on political donations including plans to increase transparency and close loopholes for foreign funding as we modernise UK democracy and ensure its protection for generations to come.”