Texture blurring

I'm using a texture atlas because I have a lot of tiny textures for a use case in Horizon Worlds. When the textures are rendered, the interpolation used is linear and the result is very blurred. I want the interpolation to be "closest" instead.

Currently my textures are 8x8 pixels of a larger texture atlas. The only way I have found to fix the blurring is to make them individual 256x256 textures, which is a huge waste of memory and loading time. Would love it if there was a better solution.

Any suggestions?