Did some more searching on the veracrypt forum and it seems I've found my answer here, you were right! VeraCrypt - View Issue Windows 10 version 1511, build 10586 update fail:
It is this specific Windows update that seems to disable filter drivers used for on the fly encryption and if Windows was encrypted using TrueCrypt, it would have failed too. There is nothing magical in TrueCrypt driver that would have prevented this.
Microsoft is doing something nasty in the update installer. VeraCrypt driver is working as expected but this installer clearly blocks it during the process of updating the system. By doing this, Microsoft is breaking FDE software other than Bitlocker and Microsoft partners ones.
What is the best way to report this to Microsoft? Obviously, on VeraCrypt, we are lacking man power to investigate further such deep kernel blocking by the update installer.