Contrary to some reports which suggest the npower Championship club have accepted a bid in the region of £3.5million, Birmingham have only fielded strong interest amid discussions with the European champions and no bid has been tabled.
Whether that does come ahead of Thursday night's transfer deadline remains to be seen but it is also understood Butland, 19, is not keen on a move to a club where he will not be playing regular first-team football as he looks to continue his development.
With Petr Cech firmly commanding the gloves at Stamford Bridge - as well as Henrique Hilario, Ross Turnbull and hot prospect Thibaut Courtois, on loan at Atletico Madrid, in reserve - Butland would expect to play back-up at Stamford Bridge.
However, there does remain the prospect of Chelsea loaning the promising goalkeeper back to Birmingham should any bid materialise over the next 35 hours.
It promises to be a fascinating close to the window with several suitors, including the likes of Liverpool, Everton, Fulham and Newcastle, having been linked to Butland - who became England's youngest-ever international goalkeeper last August when he made his bow against Italy, coming after he was first choice for Team GB's Olympic side in London.
Southampton remain the only club to have lodged a firm bid for Butland, with their £6m move knocked back last summer.
But cash-strapped Blues' financial situation has worsened since then and it is no secret they are in need of funds as they look to stave off the possible future threat of administration.
Meanwhile, Blues have knocked back Nottingham Forest's vastly improved bid for winger Chris Burke while Wolves have also been thwarted in their efforts to nab Curtis Davies and Marlon King.
City rejected an initial offer of £300,000 from Forest earlier this month and the latest approach, understood to be close to £500,000, has also been turned down, with the Reds unlikely to come back in for a third time.
Birmingham have told Wolves that star centre-back Davies and leading scorer King are not available, especially when it comes to selling to a rival club in and around them at the lower end of the Championship table.
That will represent positive news for Blues supporters, who were fearing a fire sale ahead of Thursday's deadline in order to raise much-needed funds, with Butland currently appearing as the only player likely to depart in what could be a frenzied scramble for his services.