Likely this feature: https://github.com/discourse/discourse/commit/dc1836573d96768b4cc685c52c2c15aeac9f069e
CSS for rounding the avatar flair seems missing.
In the meantime a fix appears, you can try to add this in your theme CSS:
.latest-topic-list-item .topic-poster .avatar-flair {
bottom: -2px;
right: 6px;
display: flex;
align-items: center;
justify-content: center;
background-size: 18px 18px;
background-repeat: no-repeat;
background-position: center;
border-radius: 12px;
width: 24px;
height: 24px;
}