Texture compression distortion.

I have an image (a PNG) which is getting distorted when it is imported when it is being brought into Unity. I believe it’s a compression issue. Why is this happening, and how do I fix it? See this image:

I understand it has something to do with Photoshop and opacity/levels, but I don’t know how to fix it. What is wrong with my image? It is fixed when I resave the image as a jpg, and then eliminate the white, but obviously I get some distortion when I save to jpg, and I’d like to avoid that. Any ideas about how to fix it fo reals?

Cheers,

Simon

change import settings to no compression. make sure its 1024 64 etc, unity only does ^2 textures. not square gets pressed.