If you use developer builds (from dev-download) or have helped us QA test our RC builds you may be seeing avatars that look like the above screenshot. This will affect users who ran a build number from 6601 to 6610.
In order to fix this issue, you will need to clear your KTX texture cache. Unfortunately, there is not a menu item in Interface that allows you to do this.
First, close Interface. Then manually remove the
ktx_cache folder here:
Relaunch Interface and avatars should appear as normal after your Interface client re-processes your textures.
If you have done the steps above and the issue persists, let me know here and I will attempt to assess further.