The Championship club are unable to sign players having breached Financial Fair Play regulations and face a race against time before the end of the transfer window.
They were hit with a full embargo on 1 July, having been under a 'soft' embargo since April.
But, with just over a week before the transfer window shuts, Birmingham confirmed on Monday they still cannot sign players.
It’s understood they have pinned some of their hopes on Butland leaving Stoke City to give them fresh cash and help solve the issue.
The England international has been linked with a move following the Potters' relegation from the Premier League last season, although his exit is not a certainty, with Chelsea reportedly keen.
Blues would be due 15 per cent of any profit after selling him for £3.5m in 2013.
But, with time running out, it is looking increasingly likely Butland will stay at the bet365 Stadium.
That could leave boss Garry Monk with no fresh recruits for their Sky Bet Championship season, except for Kristian Pedersen, who remains in limbo after joining from Union Berlin last month.
Fifa's transfer matching system confirmed Pedersen's move, but he is reportedly still unable to be registered by the EFL.
There is also growing frustration at the club towards chief executive Xuandong Ren over how he has handled the issue.
The club has already struck deals for the naming rights of St Andrew's and their training ground with the owners to help broaden their revenue streams and ease the pressures of FFP.
The ground has been rebranded as St Andrew's Trillion Trophy Stadium, while the training facility will be the Trillion Trophy Training Centre.
Despite their embargo, Blues have continued to pursue targets and offered Bournemouth £5m for Lewis Grabban before he joined Nottingham Forest earlier this month.
A BCFC statement on Monday said: "Talks between Birmingham City and the EFL remain ongoing in regard profitability and sustainability regulations.
"The club has spent several months working diligently to satisfy the EFL.
"Unfortunately and disappointingly the EFL are currently refusing to allow us to make additions which would enable us to strengthen the manager's squad.
"We are hopeful that a satisfactory agreement can be reached with the EFL as soon as possible to help ensure our continued competitiveness in the Championship.
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