Supervisor not allowing to submit Thesis
Perhaps you can employ a double track strategy. If the new supervisor is willing, agree to join them and do what is necessary to do so. They should be made aware that it is possible that the masters won't be awarded. 

Simultaneously pursue some sort of action at your current place to "force" your current advisor to relent and let you finish. This might require a petition to higher authority with a claim of unfairness. This sort of thing can get messy if you don't have any alternatives, but in this case you have a good one. 

So, rather than withdrawing, put the responsibility on your current university to do the right thing. Perhaps they will, but only if you make it a bit uncomfortable for them to not treat you fairly. 

But, I would first, you could just inform the current advisor that you are joining the other. You don't need to go beyond that. Perhaps he will relent, but if not, press your case with someone higher in the hierarchy.